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| Strategic thinking in sustainable energy
Future Fuels for Flight and Freight Competition – Feasibility Study
Final Report
E4tech (UK) Ltd and Ricardo Energy & Environment for
Department for Transport, delivered through Arup AECOM
23rd January 2017
E4tech (UK) Ltd 83 Victoria Street London SW1H 0HW United Kingdom Tel: +44 20 3008 6140 Fax: +44 20 7078 6180
Incorporated in England and Wales
Company no. 4142898
Registered address: 133-137 Alexandra Road, London SW19 7JY United Kingdom
www.e4tech.com
Table of Contents
Executive Summary ........................................................................................................................................... 5
1 Introduction ............................................................................................................................................... 7
1.1 Background ....................................................................................................................................................... 7
1.2 The first advanced biofuel demonstration competition (ABDC) ....................................................................... 8
1.3 Aims of the Future Fuels for Flight and Freight Competition, and this study ................................................. 10
1.4 Definitions ....................................................................................................................................................... 11
2 Potential advanced renewable fuel routes ............................................................................................. 13
2.1 Introduction .................................................................................................................................................... 13
2.2 Gasification-based routes................................................................................................................................ 14
2.3 Pyrolysis and upgrading .................................................................................................................................. 16
2.4 Sugars to hydrocarbons ................................................................................................................................... 17
2.5 Lignocellulosic ethanol .................................................................................................................................... 18
2.6 Lignocellulosic butanol .................................................................................................................................... 20
2.7 Hydrogen ......................................................................................................................................................... 21
2.8 Hydrotreated oils routes (HVO and HEFA) ...................................................................................................... 23
2.9 RFNBOs ............................................................................................................................................................ 24
2.10 Waste-based fossil fuels .................................................................................................................................. 25
2.11 Alcohols to jet and diesel ................................................................................................................................ 26
2.12 Hydrothermal liquefaction and upgrading ...................................................................................................... 27
2.13 Anaerobic digestion......................................................................................................................................... 28
2.14 Summary ......................................................................................................................................................... 30
3 Business case ........................................................................................................................................... 34
3.1 UK value and jobs analysis .............................................................................................................................. 34
3.2 Impact of the Competition .............................................................................................................................. 35
4 Feasibility of supporting these technologies ........................................................................................... 38
4.1 Technology status ........................................................................................................................................... 38
4.2 Prospective applicants .................................................................................................................................... 40
5 Funding structures ................................................................................................................................... 41
5.1 Review of updated State Aid Regulations ....................................................................................................... 41
5.1.1 Background on update of Regulations ........................................................................................................ 41
5.1.2 Relevant General Block Exemption Regulations (GBER) ............................................................................. 42
5.2 Funding Options for a new competition ......................................................................................................... 43
5.2.1 Existing scheme structure for the Advanced Biofuels Demonstration Competition .................................. 43
5.2.2 Assumptions for a new competition ........................................................................................................... 43
5.2.3 Options for £5.5m of funding over 1 year FY 17/18 ................................................................................... 44
5.2.4 Options for £20m of capital funding over 3 years FY18/19 – 20/21 ........................................................... 48
5.2.5 Options not considered suitable for £20m of capital funding over FY18/19 – 20/21 ................................ 52
6 Summary and requirements for the competition ................................................................................... 54
6.1 Synthesis of findings ........................................................................................................................................ 54
6.2 Purpose & Objectives of the competition ....................................................................................................... 55
6.3 Application process ......................................................................................................................................... 55
6.4 Eligibility criteria .............................................................................................................................................. 56
6.5 Indicative timescales ....................................................................................................................................... 57
7 Key risks to successful delivery ................................................................................................................ 59
Appendix A TRL definitions ......................................................................................................................... 67
Appendix B Relevant General Block Exemptions applicable to a competition for renewable fuels .......... 68
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Executive Summary
The UK’s Department for Transport is supporting the demonstration of advanced biofuels through an
Advanced Biofuels Demonstration Competition (ABDC), providing £25m of matched capital funding
to underpin significant private sector investment in the development of these facilities in the UK. The
Department is now seeking to further support advanced renewable fuel options, particularly for
production of fuels that can displace diesel and jet in HGVs and aviation.
The aim of this feasibility study is to support DfT in designing a follow up competition to the ABDC. It
provides information on:
the current status of the fuels that could be targeted, including an assessment of their ability to
be used in aviation and HGVs
the business case in terms of UK value from UK plants and exports, and UK jobs
likely interest of companies to enter the competition
potential funding structures and eligibility requirements
The study draws on the lessons learned from the ABDC to date, as well as updated information on
the status of the advanced renewable fuel technologies, policy developments and changing State Aid
funding requirements.
The study has shown that:
There are a wide range of technologies that could produce advanced renewable fuels suitable for
use in aviation and HGVs. Of 15 routes to renewable fuels assessed, twelve were considered to
be suitable for support through a competition, given their potential for future widespread use in
aviation and HGVs, technology development status, potential for UK deployment and expected
deployment level in the absence of further support. Those excluded were all based on
technologies that are already commercially available, with some also being likely to happen
without this additional support.
The list of technologies considered suitable includes those that produce a diesel or jet fuel
directly, those with intermediate fuels that require further processing to produce jet or diesel,
and those producing another type of fuel that could be used in HGVs to displace diesel. For those
that do not produce jet or diesel directly, it is important that the competition ensures that the
fuels are used to displace jet or diesel, for example through including an end-use partner.
The proposed funding option is a £20m competition aiming to support demonstration-scale
projects producing an advanced renewable fuel, over 3 years. A smaller pot of £5.5m funding
over FY 17/18 could be used for add-on funding for existing projects, and seed funding. All
funding would be subject to State Aid Regulations, and a notification to the European
Commission would be made ahead of the launch of the competition. However, some larger scale
projects with longer timescales for development would require front-loaded CAPEX grant
funding.
The number of applications to the competition is likely to be around 25 to 30. This estimate is
made on the basis that the seed funding will increase the number of applicants compared with
the ABDC, and whilst the scope of fuels considered is narrower than in the ABDC in some cases
(use of ethanol and butanol to displace gasoline is excluded), it has been expanded in others
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(waste-derived fossil fuels). It is also based on a review of the known technology developers in
each route, and a judgement on their likely interest in the UK compared with other regions, given
their stage of development and capacity to conduct projects in multiple regions.
The competition could lead to the demonstration of 3-5 technologies, depending on the final mix
of plant sizes. Small-scale demonstration plants would apply for grants between £1m-£5m, while
others may apply for up to £10m. Rather than specifying a required plant scale, it would be more
appropriate to require bidders to propose a scale of plant that is appropriate to progress the
technology and demonstrate the production of fuel.
The value to the UK would derive both from plants deployed in the UK, and from the potential
for building high value UK capabilities that could be exported to other regions. Given the very
early stage of development of nearly all advanced routes to diesel and jet, value estimates made
based on currently planned plants are small, particularly in 2020, given plant lead times. If a
competition was successful in supporting demo plants such that these led to 3-5 commercial
plants being built in the UK by 2030, the net annual UK benefit would be £100m. If rapid progress
could be made, both in technology demonstration at scale and in policy support, deploying
advanced diesel and jet at the levels envisaged by the IEA 2 degree scenario in 2030 would give a
global market of up to £75bn by 2030, with UK net value added from UK deployment and global
exports of £600m.
The competition would guarantee UK benefits by requiring the plants to be sited in the UK.
Whilst the competition could not include eligibility criteria to add to the UK value further, it
would be beneficial to include assessment criteria asking applicants to describe the value to the
UK from the proposed projects, as in the ABDC. The success and environmental benefits of the
competition would rely on projects meeting the eligibility criteria set out covering technology
scope, status of development, sustainability and project planning & financing.
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1 Introduction
1.1 Background
The Climate Change Act 2008 set an 80% decarbonisation target for 2050. Meeting this target will
require a radical reduction in transport emissions, which currently account for 24% of the economy-
wide total. Cutting emissions to the extent required demands a multi-faceted approach including
electrification and increased deployment of low-carbon liquid fuels.
Renewable fuels have been shown to make a potentially large contribution to the greenhouse gas
(GHG) savings achievable by 20301, through partially displacing fossil fuels across all modes of
transport. In the longer term, liquid renewable fuels, including biofuels and those of non-biological
origin, are seen as the principal decarbonisation option available to the aviation and marine sectors,
who rely on high density fuels. Similarly, there is interest in renewable fuels for HGVs, where the
prospects for electrification are uncertain.
However, there is a desire to promote a shift from biofuels made from food crops to biofuels made
from wastes and residues. The latter are not yet being produced in commercially significant volumes
(with the exception of hydro-treated waste oils and fats, and biogas from wastes). Currently,
biofuels based on wastes and residues count double towards compliance with the UK’s Renewable
Transport Fuel Obligation (RTFO) targets. European Directive (EU) 2015/1513, the "ILUC Directive”,
agreed in 2015, set a cap of 7% on the contribution of biofuels produced from food crops towards
2020 targets, and set a non-binding sub-target for advanced biofuels based on waste and residue
feedstocks of 0.5%. Member States must transpose this into national legislation by 2017, including
justifying the sub-target set for advanced biofuels. The UK consulted on the approach to
transposition of this directive in December 2016 (see below).
There is as yet no EU or UK level policy to support renewable fuels after 2020. At European level,
some form of policy support for advanced biofuels is expected to be put in place, accompanied by a
removal of support for food-based biofuels. As part of the RED II the EC is proposing a 6.8%
renewable and low carbon fuel target of which 3.8% would need to be met by advanced biofuels. The
UK DfT consultation on the RTFO is proposing a “development fuels” sub-target of 1.2% by 2030
(double counted to 2.4%). Despite the uncertainty over the exact form that policy will take, there is
still confidence that advanced biofuels and other renewable fuels of non-biological origin (both these
types of fuels being referred to in this report as “advanced renewable fuels”), and potentially waste-
based low carbon non-renewable fuels will form part of the strategy for decarbonising transport. This
raises the question of how their production and use can be encouraged.
There are a number of advanced biofuel pilot and demonstration plants in the EU, the US, Brazil and
China, as well as a few first-of-a-kind commercial plants in operation in some of these regions. As
advanced renewable fuels are not being produced in significant volumes, there is pressure on
governments to facilitate and speed up their progression to commercialisation. It is widely accepted
1 Staff working document accompanying the European Commission Communication on A European Strategy for Low-Emission Mobility https://ec.europa.eu/transport/sites/transport/files/themes/strategies/news/doc/2016-07-20-decarbonisation/swd%282016%29244.pdf
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that one of the key aspects limiting the progression from pilot to demonstration plant, and from
demonstration to commercial plant is the scale and risk associated with the required investment.
Developers have also been unable to raise this finance because of the uncertainty around renewable
fuel policy and the size of the future market. This is the principal barrier to further expansion of the
fuels nearest to commercialisation, where a number of commercial scale plants have been built. For
several technologies at an earlier stage, the component processes for making a fuel have now been
proven, but the remaining risks and costs associated with developing integrated demonstration and
first commercial plants, as well as the uncertainty in market uptake and value of the output fuels,
remain a significant barrier to realising commercial production.
The UK’s Department for Transport has started supporting the demonstration of advanced biofuels
through an advanced biofuels demonstration competition. The Department is seeking to provide
further opportunities for supporting advanced renewable fuel options, especially for production of
diesel, heavy fuel oil and kerosene displacement. The UK government believes it can play an
important role demonstrating and deploying advanced renewable fuel production in the UK, and
unlocking the potential environmental and economic benefits of a hi-tech domestic industry, and the
jobs and growth that would bring.
1.2 The first advanced biofuel demonstration competition (ABDC)
To address many of the challenges discussed above, DfT announced in August 2013 that it would
make £25m of capital funding available for an advanced biofuel demonstration competition (ABDC),
which would underpin significant private sector investment in the development of such facilities in
the UK.
The ABDC was launched in 2014, and is contributing matched grant funding to UK SMEs to help build
first-of-a-kind plants in the UK. Their goal is to produce 1m litres of advanced biofuel by the end of
2018, with GHG savings of at least 60% compared to conventional fuels and economic benefits in
terms of revenues and jobs linked to future technology deployment.
The ABDC was executed in two stages, a first phase requesting consortia to submit expressions of
interest and a second stage where shortlisted project consortia were asked to submit full proposals.
A DfT selection panel comprising experts from academia, industry, finance and policy provided
recommendations on the proposals at both stages based on their technical, economic, and
environmental merits, and benefits to the UK advanced biofuel industry.
A number of lessons have been learnt from the previous competition, which will inform the
feasibility and design of the new competition:
It takes a long time to secure private sector investors, which is critical to the success of the
project. So, certainty or very high confidence over private sector funding should be required
before public sector funding is committed.
Imposing requirements on scale or product output could limit the ability of developers to bid, or
lead them to propose projects that are not appropriate in terms of technical progression. The
former because of the impossibility to build and commission plants within the period stipulated
by the grant award, and the latter because the proposed scale is too large for some earlier, albeit
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interesting, technologies. So, greater flexibility or a lower minimum capacity or production scale
may be appropriate as long as the objectives of the competition are met (see Section 6 for
suggestions for this new competition).
Setting high GHG savings thresholds for demonstration plants may not be appropriate as these
are designed to demonstrate the technical viability of the concept, but may not be designed to
optimise energy or environmental performance so to limit costs and added complexity. So, while
a robust estimate should be provided for the emissions from the demonstration plant, what is
more important is that a convincing case is made for high GHG savings from commercial plants.
However, GHG savings below a certain threshold for demonstration plants would mean that the
fuel produced would not be eligible for support from advance renewable fuel policy schemes.
Different GHG thresholds may also be appropriate for different TRL levels.
Offtake agreements for produced fuels need to be robust. The objective of the next competition
being to displace conventional fuels in HGVs and aviation means that even greater importance
may need to be given to offtake agreements.
The eligibility criteria need to be absolutely clear. For example, if a certain volume of production
is set as a requirement it must be absolutely clear whether it refers to plant capacity or actual
production by a certain time.
The evaluation criteria need to be clear externally and internally (equally important at all stages
of the competition), but should be limited to few critical criteria that bear the greatest relation to
competition objectives. It should be clear to both bidders and evaluators what elements the
proposal needs to address in relation to the criteria, and if needed the relative importance or
weighting of those elements. The descriptions provided to the bidders and evaluators should be
the same.
A clearly defined approach to scoring evaluation criteria, with in-built QA stages, provides an
auditable record of all assessment outcomes and decisions, which fully supports DfT in case of
challenge.
The proposed projects should aim to give maximum benefits to the UK. So, checks should be
made that agreements with project partners and investors do not unduly limit the benefits to the
UK e.g. by imposing procurement of equipment from abroad. DfT should be aware of such
situations and push for negotiations to maximise benefit to the UK, and should ensure that the IP
generated as a result of the project is retained in the UK even if the concept ends up being
licenced further afield.
Appropriate time should be allowed for bidders to prepare proposals and for the assessment
process between stages such as the Selection Panel, Project Board, ISE IB and Ministers. The
Selection Panel should be kept manageable by recruiting between 6 and 8 members.
Some bidders lack resources and certain capabilities to address all requirements of the
competition. There could therefore be an argument to provide support to them during the
bidding process.
Internal procurement routes should be investigated as early as possible, to be aware of any
potential issues or processes that may add delays to contracting a Delivery Partner and launching
the competition. This is especially the case for small start-ups where even a delay in decisions of
two months could lead to bankruptcy.
Government should not to feel obliged to allocate all of the grant funds if there is insufficient
interest from companies that can prove they meet all of the requirements and have been
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evaluated by the Selection Panel, Project Board and the ISE IB as having a good chance of
succeeding
Further lessons learnt are described in the specific sections of the report to which they are relevant.
1.3 Aims of the Future Fuels for Flight and Freight Competition, and this study
There is a desire from DfT to maintain the momentum around advanced renewable fuels support
through establishing a second competition, covering advanced renewable fuels (biofuels and
renewable fuels of non-biological origin) capable of decarbonising aviation and HGVs. The aim of the
competition would, once again, be to pave the way for first-of-a-kind commercial scale plants in the
UK by proving technical and economic viability, and providing government support to help de-risk the
investment climate. The competition will have a funding level of £20m over three years, and could be
similar to the first competition, though potentially with a revised approach to take account of any
lessons learned in the first competition.
The DfT considers that it may be appropriate to focus a second competition on fuels that can be used
sustainably at high levels in transport modes that have few other decarbonisation options, in
particular aviation and HGVs, as this could be of strategic importance to the UK. These fuels may
need more support to reach the market than other advanced renewable fuels that are closer to
commercial readiness, and therefore may not be brought forward by advanced renewable fuel
targets alone. This focus and objective is shared with the ‘development fuels’ sub-target (described
below) that is currently under consideration for inclusion under the RTFO.
The aim of this feasibility study is therefore to equip DfT with the information necessary to design
and launch a follow up to the ABDC that specifically focuses on fuels of strategic importance to the
UK. This includes providing information on:
the current status of the fuels that could be targeted, and an assessment of their strategic
importance to aviation and HGVs
the business case – UK value and jobs, fuel demand, etc.
feasibility of inclusion in the competition - likely availability and interest of companies to enter
the competition given the readiness of technologies
potential funding structures
Although several of these areas were assessed in the feasibility study for the first competition2,
developments in technology and market players, the focus towards aviation and HGVs, and the
learning from the first competition mean that updated information is required.
Options for the use of a smaller, more time-limited funding pot (£5.5m over one year) are also
considered.
2 E4tech and Ricardo-AEA, Advanced Biofuel Demonstration Competition Feasibility Study, February 2014, under contract to Arup URS, commissioned by DfT https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/383577/Advanced_Biofuel_Demonstration_Competition_-_Feasibility_Study_FINAL_v3.pdf
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1.4 Definitions
Several definitions are provided below to facilitate understanding within this study. It is important to
note that these definitions are those needed for clarity in this study, and do not represent the
eligibility criteria for the competition, which are proposed later in this report. The Competition must
provide a clear definition of eligible fuels to ensure it attracts appropriate applications that meet the
Department’s objectives.
Advanced
There is no industry-wide agreed definition of the term “advanced” biofuels and other renewable
fuels. The term is generally used to describe biofuels from technology pathways that have not yet
reached commercial status, biofuels produced from residues, wastes or non-food feedstocks
considered to be more sustainable than the biofuel crops commonly used today, “drop-in” biofuels
whose molecules fit the existing fuels infrastructure, or some renewable fuels of non-biological
origin.
At EU level, the term ‘advanced’ is generally used to refer to biofuels made from feedstocks listed in
Annex IXa of the ILUC directive 20153. Note that this definition and list will be revised by the Proposal
for a revised renewable energy Directive4
Biofuels
Liquid or gaseous fuel for transport produced from biomass. ‘Biomass’ means the biodegradable
fraction of products, waste and residues of biological origin from agriculture (including vegetal and
animal substances), forestry and related industries including fisheries and aquaculture, as well as the
biodegradable fraction of industrial and municipal waste;
Renewable fuels of non-biological origin
“Renewable liquid and gaseous transport fuels of nonbiological origin” means liquid or gaseous fuels
other than biofuels whose energy content comes from renewable energy sources other than
biomass, and which are used in transport
Development fuels (definition under consultation)
A 'development fuel' is a fuel made from a sustainable waste or residue* or a non-biological
renewable fuel, and would be one of a specified fuel type:
Hydrogen
Biomethane
Aviation fuel (kerosene and avgas)
Biobutanol
HVO (hydro-treated vegetable oil)
Fuel that can be blended at rates of at least [x]% and still meet the relevant fuel standard i.e.
EN228 for petrol, EN590 for diesel
3 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015L1513&from=EN 4 ‘Proposal for a revised renewable energy Directive’ and annexes https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-consumer-centred-clean-energy-transition
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*Subject to waste hierarchy test and excluding used cooking oil (UCO) and tallow
Waste-based fossil fuels
The proposed revised RED includes a definition for ‘waste-based fossil fuels’: liquid and gaseous fuels
produced from waste streams of non-renewable origin, including waste processing gases and
exhaust gases.
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2 Potential advanced renewable fuel routes
2.1 Introduction
There are a large number of conversion technologies under development for the production of
advanced biofuels and other renewable and low carbon fuels. Conventional biofuels production
operates at commercial scale, with widespread deployment (trans-esterification of oils and fats to
produce FAME biodiesel, and fermentation of sugars (from sugar or starch crops) to produce
ethanol). However routes that use waste and residue, or non-biomass feedstocks are typically at an
earlier stage, as are those that produce fuels that have greater fungibility with jet and diesel fuels
used in aviation and HGVs.
Given that there is as yet no agreed definition of the type of fuels that will be additionally supported
in the UK through development fuels targets, this study has taken the approach of including a wide
range of fuels in this section, assessing which of them are likely to meet the requirements of a
competition, in terms of:
Potential for future widespread use in aviation and HGVs
Suitable technology development status for a competition – sufficiently advanced to allow
production of a sufficient volume of fuel for engine testing, but not already widely commercially
available
Potential benefits to the UK – in terms of deployment potential, which principally depends on
feedstock availability, or in terms of UK technology export possibilities
Additionality to expected support through the RTFO – the competition should only support
projects which would not be commercially viable with existing market based support
This section also includes other information on the routes, such as benefits (GHG and air quality
impacts) and barriers to the technologies.
The development status is expressed in terms of the technology readiness level (TRL). TRL was first
introduced by NASA, and is a relative measure of the maturity of evolving technologies on a scale of
1 to 9. As shown in Appendix A, TRL 1 indicates basic research on a new invention or scenario, while
TRL 9 represents a fully commercialised technology.
TRL definitions are not necessarily inferred by plant capacity, because of the enormous potential
difference in markets. For example, at the same capacity a small demonstration plant in one market
could count as a first commercial plant in another. Annual production or production capacity for a
specific product is therefore only an indicator for the level of commercialisation.
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Note on air quality impacts
Engine out emissions are not only a function of the fuel used, but also of the combustion process
(Compression Ignition – diesel cycle vs Spark Ignition – gasoline cycle) and a significant number of
engine technology control parameters. Exhaust gas aftertreatment systems are widely used (and can
be very effective as demonstrated by heavy duty EURO VI compliant vehicles) to control tailpipe
emissions to “within” the required limits set for the application.
Introducing a new fuel into an existing fleet could therefore have certain effects, whereas
introducing the same fuel with dedicated technology would typically be homologated to the
governing emissions legislation of the region into which it is sold. The air quality impacts given in
these sections are generalised statements of the potential effect of a fuel for indicative purposes
only.
2.2 Gasification-based routes
Technology status
Gasification converts lignocellulosic feedstocks to syngas under high temperature and pressure. The
syngas, composed of carbon monoxide and hydrogen, is then cleaned and conditioned to meet
specific requirements of the subsequent catalytic process. In the six main catalytic synthesis
technologies Fischer-Tropsch (FT) leading to diesel and jet fuel, DME, hydrogen, methane (often
called bio synthetic natural gas or bioSNG), methanol and mixed-alcohols, the conditioned syngas is
reacted over different catalysts with a variety of pressure and temperature conditions to produce
different fuels.
The technology development status varies strongly with each upgrading technology. Methanol
synthesis using biomass for gasification is currently the only upgrading technology operating at
commercial scale (TRL 8). Methane and FT-synthesis are at a lower development level of TRL 6-7 and
5-6. There is most activity in FT-Diesel, but this is limited to operations mainly at pilot scale, with a
few first-of-a-kind commercial and demonstration scale projects are planned for 2017 onwards. Few
operational or planned projects currently exist globally for methane and mixed-alcohol synthesis.
Projects on catalytic synthesis to DME from biomass have been cancelled. The UK has one player,
Advanced Plasma Power (APP, an ABDC awardee) operating one pilot plant and planning a
demonstration scale plant to produce bioSNG from waste, using technology from Outotec. The UK
also has leading technology providers including BP, Johnson Matthey and Velocys.
There has also been work on anaerobic fermentation of syngas by micro-organisms into ethanol or
other products. However, there is currently little high TRL activity in this route: the main developer
above pilot scale INEOS Bio is aiming to sell their plant by the end of 2016. Lanzatech, whose syngas
fermentation technology is currently being demonstrated based on CO-rich steel mill waste gases,
could also potentially use biomass-derived syngas, and have done tests in the US on this approach,
although this is not their current focus.
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Benefits
Gasification with catalytic synthesis offers a variety of fuels that can be used to decarbonise both
HGVs and aviation.
Aviation – jet fuel from FT process
HGVs – diesel from FT process can be used as a drop-in replacement for diesel. DME, methane
and hydrogen can be used in modified HGV engines, and potentially hydrogen in fuel cells in the
future. Methanol and other alcohols would require a further conversion step to produce diesel or
jet, or blending with additives for use in a dedicated HGV. Scania have investigated using
methanol in dedicated HGV engines and further investigations are ongoing by VTT in Finland.
GHG intensity values are not available for all the different gasification and catalytic synthesis routes
based on operational projects. However, typical values for GHG savings are given in the RED:
FT-Diesel using waste wood: 4gCO2e/MJ which leads to GHG savings of 95% (RED).
Methanol and DME using waste wood: 5gCO2e/MJ which leads to GHG savings of 95% and
94% (RED).
The air quality benefits depend vary for the three main fuel types:
Methanol: Methanol can potentially be utilised as a diesel substitute either with an ignition
enhancer (similar to ED95) or in a dual fuel application where a small quantity (pilot injection) of
diesel is used to ignite the methanol. Both are expected to demonstrate lower NOx and
particulate emissions
Methane: Methane can be used in a spark ignition engine where due to the lack of carbon to
carbon bonds it will demonstrate negligible particulate emissions, but potentially higher NOx
emissions that the after treatment system will be able to abate. Methane can also be used in a
diesel engine as a dual fuel application where a small quantity (pilot injection) of diesel is used to
ignite the methane. This is expected to demonstrate lower NOx and particulate emissions.
FT-Diesel is likely to demonstrate similar emissions to diesel. Particulate emissions could be
reduced if the fuel was designed to have shorter chains and/or less double carbon bonds.
Barriers to deployment (financial, technical, supply chain, demand)
Technical challenges and the difficulty of raising finance for capital intensive projects have led to a
lack of biomass gasification and catalytic synthesis projects at commercial or large demonstration
scale. Consistent syngas quality, produced reliably and efficiently from different biomass and waste
feedstocks, meeting the syngas requirement of the catalytic synthesis upgrading steps needs to be
achieved. This will improve reliability, reduce the production costs and improve overall economics.
Given the expected high costs of fuel production from these routes, policy support will be needed to
encourage deployment of these gasification-based routes. As several are at an earlier stage of
development and have higher projected costs than other routes that are included in the same policy
support categories, they may not be developed as a result of these targets.
Gasification based plants typically have large economies of scale, driving larger projects with greater
feedstock needs than other routes. This means that careful choice of location and feedstock options
is required.
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Commercialisation potential
For most catalytic synthesis routes, apart from commercial-scale methanol synthesis, the next step
for commercial deployment is the successful operation of full-scale demonstration plants. This
includes Advanced Plasma Power in the UK, a technology developer now constructing a
demonstration plant for the production of bioSNG using MSW, a widely available and low-cost
feedstock in the UK. Overall, only catalytic synthesis to methanol has currently a high potential for
commercialisation in the short term as the technology operates at first-of-kind-commercial scale and
uses low-cost feedstocks.
2.3 Pyrolysis and upgrading
Technology status
Pyrolysis is the controlled thermal decomposition of (typically dry) biomass at moderate
temperatures, in the absence of oxygen, to produce liquid oil, gas and charcoal (biochar). Catalytic
fast pyrolysis maximises the production of the liquid pyrolysis oil fraction (instead of char). Crude
pyrolysis oil can be upgraded by directly blending with fossil vacuum gas oil within an existing
refinery fluid catalytic cracker (FCC) unit or by undergoing hydro-deoxygenation before
hydrocracking. Both upgrading options produce a combination of light, medium and heavy products,
which can be distilled to produce diesel, jet and gasoline streams.
Conventional fast pyrolysis technologies for making food flavourings and bio-oil for heat and power
applications have already been commercialised in a few plants5, so fast pyrolysis is currently at TRL 8.
However, upgrading is less developed at around TRL 5-6, with 5-20% short blending campaigns
conducted at demonstration scale in a few oil refineries, but no dedicated upgrading facilities
operational globally. Hydro-deoxygenation of pyrolysis oil is at an earlier lab and pilot scale (TRL 4-5).
The UK has strong capabilities in pyrolysis generally; however the focus to date has been on
producing pyrolysis oil for use in heat and power applications. Fuel-focused fast pyrolysis UK actors
include Future Blends (now bought by Next BTL LLC), who operate a pilot plant near Oxford using a
modified fast pyrolysis platform, and Torftech Energy, who have multiple waste-to-energy plants and
are researching biofuel production6.
Benefits
Fast pyrolysis with upgrading has the potential to produce both jet and diesel that can be used to
decarbonise both HGVs and aviation. No GHG intensity values are available for the pyrolysis and
upgrading routes based on operational projects. The air quality impacts of upgraded pyrolysis oil to a
drop-in diesel or gasoline will be similar to conventional diesel and gasoline.
5 Jones et al. (2016) “Fast Pyrolysis and Hydrotreating: 2015 State of Technology R&D and Projections to 2017”, Pacific Northwest National Laboratory (PNNL). Available www.pnnl.gov/main/publications/external/technical_reports/PNNL-25312.pdf 6 Bridgwater, T. & I. Watkinson (eds.) (2016) “Biomass and Waste Pyrolysis A Guide to UK Capabilities”, Aston University
European Bioenergy Research Institute (EBRI), Aston University. Available at: www.pyne.co.uk/Resources/user/UK%20Biomass%20and%20Waste%20Pyrolysis%20Guide%202015%20081015.pdf (17 Nov 2016)
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Pyrolysis oil can be fractionated to produce pyrolytic lignin and sugars which can both be used as
intermediate chemicals to produce resins for example
Barriers to deployment (financial, technical, supply chain, demand)
The main barriers relate to pyrolysis oil upgrading step. The use of hydrotreating in this step
contributes significantly to fuel production costs. Catalyst lifetime, deactivation, stability and cost are
the main technical barriers for the upgrading process which slow-down further deployment. Full
integration of fast pyrolysis with upgrading in a single facility has also not yet been demonstrated at
scale, and presents a significant challenge.
Policy support will be needed to encourage deployment this route. Whilst these processes are not
the most commercialised routes that would fit within an advanced/development fuels category,
leading to some uncertainty over the effectiveness of targets in promoting their deployment, several
barriers are reduced compared with gasification based routes. Pyrolysis plants could be economically
viable at smaller scales, entailing lower capital costs, and the costs of the whole process can be
reduced by integration in existing processes such as refinery upgrading.
Commercialisation potential
To achieve commercial scale pyrolysis oil upgrading requires continuous demonstration over a larger
timeframe in existing oil refineries or the demonstration in an integrated facility. The former has
been tested for short periods with existing oil refinery actors while the latter is only at early pilot
stage. The UK has very limited prospects to achieve a demonstration scale integrated facility before
2030. Integration in a UK refinery could be more achievable in the timeframe of the competition, but
this would depend on availability of pyrolysis oil, willingness of refiners to participate, and on the
level of policy support available. The value of the competition supporting UK refinery upgrading
alone would need to be carefully evaluated.
2.4 Sugars to hydrocarbons
Technology status
These routes produce hydrocarbon fuels from sugars. For routes based on lignocellulosic feedstock,
technologies developed for lignocellulosic ethanol plants are used to extract fermentable sugars
from the starting waste and residue feedstocks. Two routes exist to transform LC sugars to
hydrocarbons. The first route consists of biological conversion by aerobic fermentation (with air, at
atmospheric pressure), to generate specific hydrocarbon precursors, before product recovery,
purification and upgrading to diesel, gasoline and jet fuels. This includes routes via biological
catalysts, heterotrophic algae fermentation and modified yeast. Aerobic fermentation of LC sugars is
currently at TRL 5 based on tests by Global Bioenergies and Amyris. In the second route, aqueous
phase reforming (APR), an aqueous solution of sugars is converted by a high temperature reforming
process using a chemical catalyst to produce a mixture of acids, ketones, aromatics and cyclic
hydrocarbons, plus hydrogen and water. Further processing steps are then required to produce
gasoline, diesel and jet fuel, as this requires a series of condensation reactions to lengthen the
carbon chains in bio-crude, before hydrotreating and isomerisation. The APR process using LC sugars
is currently at TRL 4-5 based on trials by Virent (now Tesoro) at lab scale. Besides Johnson Matthey
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(catalyst developer) and Shell working with Virent, there are no other known UK companies involved
in sugar to hydrocarbon routes.
Benefits
Sugar to hydrocarbon routes have the potential to directly decarbonise HGVs and aviation through
the direct production of diesel and jet fuel. No GHG intensity values are available for Sugar to
hydrocarbon routes based on operational projects. The air quality impacts of sugar to hydrocarbon
routes to drop-in diesel or gasoline will be similar to conventional diesel and gasoline. Sugar to
hydrocarbon routes have a wide scope for biorefining and different biochemicals depending on
process and company. For example, Virent focuses on paraxylene used in PET bottles while Amyris
has a focus on farnesene that can be used to make solvents, coatings and many others products.
Barriers to deployment
For the APR conversion route, catalyst challenges such as deactivation and coking and low selectivity
to hydrocarbons are among the main technical barriers. For aerobic fermentation routes, the
variability of hydrolysates from real-world LC feedstocks and the presence of inhibitors from the
integrated pre-treatment process are main technical challenges7.
There is also an economic barrier related to using the same feedstocks as more developed routes to
fuels: for example, more expensive routes to hydrocarbons will not be commercially viable as long as
ethanol produced from the same sugars has a similar market value to the hydrocarbon fuel product
that would be produced.
Commercialisation potential
The progress towards commercialisation is expected to be low as there is limited activity on using LC
sugars by existing companies in this route. Further, besides the involvement of Johnson Matthey and
Shell with Virent, no UK actor is involved which limits the commercialisation potential in the UK in
the short and medium term significantly.
2.5 Lignocellulosic ethanol
Technology status
Lignocellulosic ethanol is the most advanced biochemical conversion process. It involves the pre-
treatment and hydrolysis of lignocellulosic feedstock to C5 and C6 sugars and the consequent
fermentation of these sugars to ethanol. There are several technology providers operating first-of-
kind commercial plants and a similar number having plants in planning or construction status in
Europe, the US, China and Brazil. In addition there are a comparable number of technology
developers at pilot and demonstration scale. The UK has one first-of-kind commercial lignocellulosic
ethanol plant in the early development stages. Danish technology developer Inbicon is cooperating
with UK project developer Vireol on this project which is at the initial feasibility stage. At pilot scale
Fiberight is working in the UK on two IB catalyst funded projects testing parts of their MSW to sugars
process. Nova Pangaea, an ABDC awardee, uses a pyrolysis-based process to convert forestry
7 J. Holladay et al. (2014) “Renewable routes to jet fuel”. Available at http://aviation.u-tokyo.ac.jp/eventcopy/ws2014/20141105_07DOE%EF%BC%BFHolladay.pdf
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residues into LC sugars for subsequent conversion to ethanol. In addition, the UK has acitivty in
research, pre-treatment, biocatalysis and process development.
Benefits
Ethanol cannot be used in jet fuel, or in diesel directly. However, options exist for supplying these
markets via
an alcohol to jet route (ethanol to jet or diesel, covered below), or
to fuel HGVs through blending with additives and use in a dedicated HGV engine. For example
ED95 is an ethanol based fuel consisting of 95 percent ethanol with the addition of ignition
improver, lubricant and corrosion protection. Particulate levels can be expected to be very low.
There are Scania HGVs and buses operating currently in the UK on ED95.
No actual GHG intensity values are available from any of the operating first-of-a-kind commercial
plants. From the data used in the Renewable Energy Directive (RED), wheat straw-derived ethanol
has typical GHG emissions of 11 gCO2e/MJ which leads to GHG savings of 87%8. Ethanol as a blend
into gasoline typically lowers NOx and particulate matter (both particulate mass and number). Non-
regulated but carcinogenic aldehyde emissions should be expected when combusting ethanol in
spark ignition engines.
Lignocellulosic ethanol production can be combined with other uses of the sugars produced as an
intermediate in the process, with the biorefinery producing a large variety of chemical building blocks
such as lactic or acetic acid. However, the competition from other food-based sugars routes in these
markets is likely to be significant and so would require policy support for lignocellulosic sugar-based
biochemicals.
Barriers
The lack of policy certainty at EU and UK level is the main barrier for the development of further
commercial scale lignocellulosic ethanol projects. Developers consider that advanced biofuels sub-
targets that include LC ethanol would be sufficient to drive commercialisation of this technology in
Europe. In the UK, ethanol is not currently included in the proposed development fuel list, and so LC
ethanol is unlikely to be produced in the UK and sold in the UK, as developers will focus on other
countries with targets that support LC ethanol. In addition, ethanol would not be converted into fuels
that can be used in aviation or HGVs without additional policy support, given the additional costs
compared with selling the fuel directly for gasoline blending in another market.
The feedstock resources of some feedstocks such as straw available in the UK may not make it an
attractive proposition for multiple plants which may reduce the attractiveness to producers. The first
commercial plants are expected to have higher production costs than first generation ethanol making
policy support a necessity, but technical improvements such as co-fermentation of C5 and C6 sugars
to improve yields are important to further improve the economics of the process.
8 DIRECTIVE 2009/28/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 April 2009 as amended by Directive 2015/1513 of 9 September 2015.
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UK commercialisation potential
The first early commercial LC ethanol plants globally are based on agricultural residues such as straw,
which is a limited feedstock resource in the UK. Technologies that allow a wider feedstock variety
such as including wood or MSW would be preferable in the mid-term to avoid feedstock limitations.
Lignocellulosic fermentation and further bio-refining provide synergies for the UK due to strong
research capabilities and several players at earlier stages of development in different parts of the
value chain. There may be value in supporting the development of such technologies, in particular
where value to the UK could be realised through IP development, improved efficiency, reduced
production costs and the potential for further bio-refining activities.
2.6 Lignocellulosic butanol
Technology status
Lignocellulosic butanol technologies convert second generation feedstocks into butanol in a similar
way to lignocellulosic ethanol (see above). Most butanol developers, including those closest to
commercialisation, are focusing on scale-up and yield improvements using food-crop based sugars.
Very few players currently work on the commercialisation of lignocellulosic butanol and some of
these are currently on hold or have been mothballed. Green Biologics and Celtic Renewables are
engaged in pilot plant activities in the UK, but Butamax’s UK pilot plant in Hull has been mothballed,
with Butamax continuing development outside the UK.
Benefits
Butanol can be blended with gasoline at higher proportions than ethanol within the same oxygenate
limit, for example 16% butanol by volume is equivalent to E10. Butanol cannot be used in jet fuel, or
in diesel directly. However, options exist for supplying these markets via an alcohol to jet route
(butanol to jet or diesel, covered below). No information is available on testing of butanol for use in
HGVs.
Actual GHG savings are not yet known, but are expected to be similar to those from lignocellulosic
ethanol. Butanol displays similar characteristics as ethanol in a spark ignition engine, see ethanol
section. In addition, butanol represents an attractive intermediary building block for bio-based
chemicals. The air quality characteristics of butanol are very similar to ethanol, please see above.
Barriers to deployment
In comparison to lignocellulosic ethanol, the separation process is more energy intensive and the
fermentation technologies are less mature making the process less cost competitive. It is currently
more attractive for butanol developers to convert first generation ethanol plants to butanol (for
example to overcome the US ethanol blending limits) which limits the interest in lignocellulosic
butanol development. Butanol is included on the draft development fuels list, but it is not yet known
whether the value of this support would be enough to make lignocellulosic butanol more attractive
than alternative markets. In addition, butanol would not be converted into fuels that can be used in
aviation or HGVs without additional policy support, given the additional costs compared with selling
the fuel directly for gasoline blending in another market.
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UK commercialisation potential
The potential for commercialisation will depend on the successful scale-up of first generation butanol
and lignocellulosic ethanol. Players currently operating at pilot scale could deploy demonstration
scale plants by 2020 if yields can be increased and policy incentives exist. As with LC ethanol, the
feedstock resources of some feedstocks such as straw available in the UK may not make it an
attractive proposition for multiple plants which may reduce the attractiveness to producers.
However, given the existing UK butanol players there is a case for global deployment of UK IP.
2.7 Hydrogen
Technology status
Renewable or low carbon hydrogen can be produced via a range of routes:
Renewable hydrogen from biomass – covered in the gasification and catalytic upgrading section.
Renewable hydrogen from water electrolysis using renewable electricity – covered in this section
Low carbon hydrogen from fossil fuels with carbon capture and storage - not considered further
here given the focus on renewable fuels, and current lack of UK carbon capture and storage
infrastructure
Renewable hydrogen from novel routes such as photoelectrochemical watersplitting,
thermochemical cycles etc. – not considered further given their early stage of development
The most promising near-term electrolytic technologies (alkaline and PEM electrolysis) are already
available today (TRL 9). However, given the earlier stage of renewable hydrogen transport systems as
a whole, this option is considered further in this section, rather than being excluded at the start.
For transport applications, small scale electrolysis is considered most feasible in the near term, given
that the electrolyser can be sited at a refuelling stations, and the system sized to meet the transport
demand. However, there is also UK interest in deploying electrolysers close to sources of renewable
generation, or at constrained nodes on the electricity grid, to enable greater use of renewable
electricity9. Some or all of the hydrogen produced by these systems could be used for transport
applications.
Hydrogen could be used in road transport (cars, buses, light duty vehicles, HGVs), marine applications
and trains, but not in aviation, due to its low energy density. Hydrogen use in cars is in the early
stages of commercialisation, with buses at the fleet demonstration stage. Use in HGVs requires
further work to develop the technology and improve economics. Use in marine is at the early
demonstration stage, with activity and interest from several UK companies in use of fuel cells and in
engine conversions10. Use in rail is at demonstration stage globally, with university research in the
UK.
Benefits
Hydrogen produced using renewable electricity can have very low well-to-tank GHG emissions, down
to zero if renewable electricity is also used for compression and dispensing. Note that if the WTT
9 Ref roadmap 10 Roadmap appendix
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GHG intensity is non-zero, use in a fuel cell vehicle has an increased efficiency compared with a
conventional vehicle, which means that well-to-wheel GHG savings are reduced. This factor is set at
0.4 in the FQD and RED, meaning that hydrogen can have a WTT GHG intensity 2.5 times higher than
the GHG threshold, or 83.8 gCO2e/MJH2. It is important to consider the well-to-wheel emissions of
the system proposed in order to make a valid comparison with conventional fuels and the RED GHG
saving requirements. Policy support may depend the requirements for electrolysers that are not
directly connected to a renewable electricity source, which are currently being consulted on.
When used in a fuel cell, hydrogen has zero air pollutant emissions. In internal combustion engines,
there are emissions of NOx only, which are low11.
In addition, production of hydrogen can have energy systems benefits, such as allowing the use of
‘stranded’ renewable energy resources, and providing services to energy networks, such as balancing
and avoiding grid constraints.
Barriers to deployment (financial, technical, supply chain, demand)
For hydrogen from electrolysis, high electricity costs represent the major barrier to market
competitiveness compared with hydrogen produced from natural gas. Technology development and
economies of scale could also reduce costs, improve performance and improve commercial
competitiveness. Inclusion of hydrogen from renewable electricity in the RTFO from 2017 will be the
first market based policy support available in the UK to promote renewable hydrogen over fossil-
hydrogen in transport. In addition, for electrolysers at refuelling stations to offer attractive
economics, it is essential to secure low cost electricity, by operating electrolysers to take advantage
of fluctuations in electricity prices and also providing balancing services to the grid. This requires
work on business models, as well as an appropriate market framework for electrolysers to generate
value from system services.
However, overall, the main barriers to use of hydrogen in transport are high system costs compared
with conventional fuels and vehicles, availability or maturity of vehicles (see above), and lack of
supporting hydrogen infrastructure. Particularly for hydrogen systems fuelling heavier vehicles, the
performance and cost of the electrolyser itself is not the principal barrier to deployment. As a result,
it may be more appropriate to support renewable hydrogen in transport systems through other
funding mechanisms that are more appropriate to the main challenges faced, such as through the
Hydrogen for Transport Advancement Programme (HyTAP), which funds hydrogen refuelling stations,
through vehicle development and trials funding, and/or regional funding for integrated projects.
Commercialisation potential
The electrolyser industry consists of around 30 SMEs. The UK has a leading actor in PEM electrolysis
(ITM Power), currently targeting small and medium scale applications, up to half a tonne of hydrogen
per day. There is also UK experience in using electrolysers: Pure Energy Centre have installed an
operated electrolysers for a number of UK and overseas clients. Other UK players are working in the
value chain, and the UK has relevant capabilities to develop advanced materials and processes in this
area. On the vehicles side, there are UK players in small vehicles and parts of the supply chain for cars
and heavier vehicles, with the UK’s hydrogen and fuel cell roadmap proposing targeting UK vehicle
11 Ref roadmap report
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development efforts at buses and larger vehicles (vans, trucks, HGVs) and small vehicles. On the
marine side, the UK has the potential to take a leadership role given the history of ship-building, the
number of inter-island ships in operation and globally leading demonstration projects.
2.8 Hydrotreated oils routes (HVO and HEFA)
Technology status
Hydrotreatment of oils involves the conversion of vegetable or waste oils into diesel and jet fuel,
generally referred to as hydrogenated vegetable oil (HVO) when converted to diesel and
hydroprocessed esters and fatty acids jet (HEFA) when converted to jet. There is also testing on the
use of HVO in jet applications, where it is referred to as HEFA+. Under the development fuels
definition under consultation, HVO and HEFA would only be included if produced from qualifying
waste oils not including UCO and tallow. The process of hydrotreatment consists of a thermal
decomposition process, a hydrogenation and isomerisation reaction to produce HVO, and an
additional selective cracking process to produce HEFA. Depending on the plant configuration, it can
be a dedicated HVO plant or a co-production plant with different shares of HEFA and HVO as
products, as well as other co-products such as naphtha and propane. The plant can either be a
separate unit at an existing oil refinery (allowing for co-usage of hydrogen) or be built as a dedicated
standalone plant.
HVO production is at TRL 9, as production is underway in several countries, with multiple active plant
technology developers. HEFA production is at an earlier stage commercially: it has been produced at
several plants, and is in use in aviation, but this is not widespread. However, there is considered to
be no technical barrier to production at TRL9, if the business case for production and use in aviation
were viable for a wider range of users.
Benefits
Hydrotreating routes produce fuels that can be used directly in diesel or jet, at up to 100% for HVO in
diesel, 50% for HEFA in jet, and potentially 10% for HEFA+ in jet. GHG savings vary widely depending
on the feedstock used, but are very high from waste feedstocks. HVO has been shown to reduce
particulate matter emissions significantly, depending on the blend percentage with diesel and after
treatment systems used. NOx emissions have been shown to be similar.
Barriers to deployment (financial, technical, supply chain, demand)
The principal barrier to supply of HVO and HEFA from waste oils aside from UCO and tallow is the
availability of those waste oils themselves. There is no technology barrier to their production. HEFA
has additional barriers compared with HVO, in that the economics of the route are not competitive
with jet fuel, and aviation biofuels are only included within policy support for biofuels in a small
number of countries.
Commercialisation potential
Given that the supply of HVO/HEFA from waste oils aside from UCO and tallow is constrained by the
waste oils availability, and a greater HVO plant capacity exists than the current supply of these
materials, further supply of waste oils is likely to be converted in existing plants, displacing vegetable
oils. The support available to this route in several countries (development fuels support in the UK,
double counting in many Member States) is likely to be sufficient to support further use of these
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feedstocks for HVO today (given that this route is economically viable) and HEFA if included in
biofuels and/or aviation policy, and potentially to support further plants in the future if the
sustainable feedstock base increased.
2.9 RFNBOs
Technology status
Renewable fuels of non-biological origin (RFNBO) include in this feasibility study the production of
synthetic fuels such as methanol, FT-Diesel and methane, but exclude hydrogen production, which is
covered above. These RFNBOs involve the electrolysis of renewable electricity to hydrogen and
converts the hydrogen with carbon dioxide through catalytic synthesis into synthetic fuels. The most
advanced player in this technology is currently at TRL 8: the Carbon Recycling Initiative (CRI) plant in
Iceland producing methanol from geothermal electricity. There are two other pilot projects, a
Sunfire/Audi project in Germany producing synthetic diesel and the SOLETAIR project in Finland12
undertaken by VTT/KTI and others to test the production of methanol, synthetic diesel and higher
alcohols. Audi is involved in three other pilot projects: a cooperation with Joule in the US to produce
ethanol and two P2G projects to produce methane in Germany13. The TRL of these routes is currently
at 5-6. Besides ITM Power focusing on synthetic gas and academic research, for example at the
University of Sheffield (TRL 4) the UK does not have any significant players working on synthetic fuels
from hydrogen.
Benefits
For the fuel applications and air quality, see section 2.2 on gasification which covers the same fuels.
The GHG emissions can be very low, for example, for CRI in Iceland based on geothermal electricity
the GHG intensity is 8.5gCO2e/MJ which represents a 90% saving14. However, this depends strongly
on the route and source of electricity, and the way in which the GHG methodology will be applied to
RFNBOs. It would be important to consider the well-to-wheel emissions of the system proposed in
any proposal in order to make a valid comparison with conventional fuels and the RED GHG saving
requirements. Policy support may depend on the requirements for electrolysers that are not directly
connected to a renewable electricity source, which are currently being consulted upon.
Barriers to deployment
Increasing life times and operating efficiencies of electrolysers, improving the catalyst and reaction
design for fuel production and the more efficient capture of CO2 are the main technical development
needs15,16. Developing a robust business case will require matching low cost renewable electricity
12 Green Car Congress, 2016. Compact pilot plant for solar to liquid fuels production. Available at: http://www.greencarcongress.com/2016/11/20161109-soletair.html 13 Audi, 2016. Synthetic fuels: Audi e-fuels. Available at: http://www.audi.com/corporate/en/sustainability/we-live-responsibility/product/synthetic-fuels-Audi-e-fuels.html 14 Boulanger, P. 2015. Power-to-Methanol: Green transport fuel, renewable energy storage and grid balancing service. Available at: https://ec.europa.eu/energy/en/events/workshop-using-bioenergy-energy-storage-and-balance-grid 15 E4tech, Study on development of water electrolysis in the EU (2015). 16 Styring. P, Daan Jensen, Heleen de Coninck, Hans Reith, Katy Armstrong, Centre for Low Carbon Futures, Carbon Capture and utilisation in the green economy (2011)
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with a high plant utilisation in order to cover the capital cost. Even though there is little cost data
available due to the early stage of development, the production costs of synthetic fuels from
hydrogen are likely to be higher than from other renewable fuels. This means that even though they
are planned to be included in support from the RTFO, they are unlikely to be supported through
policy aimed at a wider category of fuels (such as development fuels) alone. Policy support may also
depend on the requirements for electrolysers that are not directly connected to a renewable
electricity source, which are currently being consulted upon. In the proposed RED II, RFNBOs are
included in the proposed 2030 target, but not the advanced biofuels and biogas sub-target.
Commercialisation potential
The UK is unlikely to be an ideal place for synthetic fuel plants as it requires cheap renewable
electricity, co-located with CO2 sources. In addition, most companies working on synthetic fuels are
not based in the UK and are unlikely to build their first plant in the UK. However, a potential scenario
for deployment of these technologies in the UK is the interest of a UK region with considerable
renewable power resources and sources of CO2. This could change in the medium term (around
2030) with a higher penetration of renewables in the UK.
2.10 Waste-based fossil fuels
Technology status
‘Waste-based fossil fuels’ is defined here as liquid and gaseous fuels produced from waste streams of
non-renewable origin, including waste processing gases and exhaust gases. Lanzatech’s process uses
a waste fossil source of carbon such as steel mill carbon monoxide. Other fuels could include the use
of mixed MSW, waste plastics or tyres as feedstock in pyrolysis, hydrothermal liquefaction or
gasification to produce liquid fuels. A few European companies offer pyrolysis plants for waste tyres
to produce pyrolysis oils, such as Metso who have tested 32t of waste tyres for 800h of continuous
operation in a pilot plant17. Others include Enviro Systems, but currently their main aim is the
recovery and sale of black carbon18. In addition a few Chinese companies and US offer pyrolysis
plants for waste plastics and tyres, but it is unclear whether any plants are operational, at which
scale and if any upgrading to liquid fuels is undertaken19,20. The TRL can be estimated at 8, similar to
the pyrolysis process, while the upgrading is only at TRL 4-6 (see chapter 2.3). In the UK Recycling
Technologies works on a waste plastic pyrolysis process to produce naphtha, slack wax and heavy
fuel oil and will test their first plant with a council in the UK. However, their current focus appears to
be heavy fuel oil21. Another UK company, 2G BioPower works on waste tyre pyrolysis, but their status
and intent to produce liquid fuels is unclear.
17 Metso, 2016. Tire pyrolysis – the true recycling solution. Available at: http://www.metso.com/products/pyro-process/tire-pyrolysis-sytems/ 18 Enviro Systems, 2016. Plants. Available at: http://www.envirosystems.se/technology/plants-2/?lang=en 19 Bestongroup, 2016. Tyre pyrolysis process. Available at: http://tyrepyrolysisplants.net/tyre-pyrolysis-process.html 20 Huayin Group, 2016. Waste tyre to fuel pyrolysis plant. Available at: http://www.huayinenergy.com/products/HY-6th_Waste_to_Oil_Pyrolysis_Machine/ 21 Williams, C. Is plastic-to-oil on brink of success in the UK? In MRW. Available at: https://www.mrw.co.uk/10012806.article
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Benefits
Regarding the benefits of fuels and their air quality impact, please see section Error! Reference
ource not found. for ethanol and the relevant chapters for pyrolysis, hydrothermal liquefaction and
gasification. GHG emissions of waste based fossil fuels will vary widely depending on the process and
feedstock. In particular, the counterfactual fare of the waste used, such as alternative disposal
options is crucial. As a result any process would require a full lifecycle carbon intensity assessment
including consideration of the counterfactual.
Barriers to deployment
For technical barriers please see the relevant chapters on gasification (2.2), pyrolysis (2.3) and HTL
(2.12). For gas fermentation, the main challenges are yield and energy use in the process. Waste
based fossil fuels are not currently supported by the RTFO, but would count towards requirements of
the FQD, and so be supported by the proposed Motor Fuel Greenhouse Gas Emissions Reporting
Regulations. In the proposed RED II, waste-based fossil fuels are included in the proposed 2030
target, but not the advanced biofuels and biogas sub-target.
Commercialisation potential
Lanzatech has previously expressed an interested in the UK and with policy support could develop a
project in the near future to produce ethanol. Liquid fuel production via pyrolysis from waste tyres or
plastics seems less likely in the near term as the UK does not appear to have any players working on
liquid fuels for HGVs or aviation and it would require the interest of a UK refinery for the pyrolysis oil
upgrading to liquid fuels. Swindon-based Recycling Technologies currently focuses on low-sulphur
ship engine fuel.
2.11 Alcohols to jet and diesel
Technology status
Short chain alcohols (such as ethanol, methanol, n-butanol and isobutanol) can be catalytically
converted to longer-chain hydrocarbon fuels, including gasoline, diesel and jet fuel. The conversion
of ethanol or butanol molecules typically involves a combination of dehydration then oligomerisation
reactions (combining molecules into longer-chains), followed by hydrogenation (adding hydrogen),
isomerisation (branching to meet fuel specifications) and finally distillation into the required product
streams. The process for methanol to gasoline (MTG) follows a different conversion pathway, which
includes dehydration of methanol over a catalyst to form dimethyl-ether (DME), followed by further
catalytic dehydration and hydrogenation reactions via light olefins to gasoline. As LC alcohols are
(almost) chemically identical to their 1G alcohol or fossil alcohol counterparts, the TRL of catalytic
conversion to drop-in hydrocarbons is largely unrelated to the origin of the alcohol. The first step,
ethanol to ethylene is a commercial technology at TRL 9. The ethylene to fuels conversion step is not
commonly used today, but industry players consider that it could be built if the market conditions
were right to make it economically feasible. Overall, technologies from LC alcohol to hydrocarbon
products are currently operating at TRL 5, but could progress quickly given prior experience. The first
commercial plants, but not using lignocellulosic feedstocks, are planned by two players in the US for
2020. Pilot and lab scale activities are both ongoing in the US and Sweden.
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Benefits
The fuel and air quality impacts are similar to the other routes producing drop-in diesel (EN590), see
section 2.2 and 2.3. GHG impacts will depend on the emissions of the alcohol feedstock used, with a
small increase related to the second conversion step.
Barriers to deployment
The biggest remaining technical challenge to alcohol-to-hydrocarbon technology is optimisation of
the process conditions towards greater throughput and reduced recovery losses, whilst minimising
the risks of runaway reactions22.
As with other routes from sugars, there is also an economic barrier related to using the same
feedstocks as cheaper routes to fuels: for example, ethanol to jet will not be commercially viable as
long as ethanol produced from the same sugars has a similar market value to the jet fuel product that
would be produced.
Commercialisation potential
Even though the integrated technology from feedstock to hydrocarbons is only at lab and early pilot
stage, it is expected that, with existing technology, converting commercial scale operations alcohols
to hydrocarbons could be achieved within a few years. There has been previous interest by some
developers in plants in the UK. However, this would require a strong economic driver, including
support from an end user and policy support under the RTFO.
2.12 Hydrothermal liquefaction and upgrading
Technology status
Hydrothermal liquefaction (HTL) is a process where biomass (plus a large amount of water) is heated
at very high pressures to convert it into energy dense ‘bio-crude’. The near- or super-critical water
acts as a reactant and catalyst to depolymerise the biomass, although other catalysts can also be
added. The characteristics of HTL oils make them easier to upgrade and more suitable for diesel
production. HTL technology for producing bio-crude is currently at early demo scale (with continuous
reactors), with an early demo in operation (TRL 5-6), but experience of upgrading HTL oils is limited
to lab-scale23,24 batch reactors at TRL 3-4 (and no integrated plant or refinery testing experience). The
overall technology route is therefore at TRL 4. There are no commercial UK actors, but some
academic research.
22 Personal communication with technology developer 23 Mullins, M. (2015) “Conversion of Biologically Derived Oils into Transportation Fuels”, Michigan Tech. Available at www.svebio.se/sites/default/files/8.%20Michael%20Mullins%20-%20Conversion%20of%20Biologically%20Derived%20Oils%20into%20Transportation%20Fuels.pdf 24 Lane, J. (2015) “Still algae, still fuels: The Digest’s 2015 8-Slide Guide to Muradel”, Biofuels Digest. Available at www.biofuelsdigest.com/bdigest/2015/11/10/still-algae-still-fuels-the-digests-2015-8-slide-guide-to-muradel/
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Benefits
The benefits are similar to those of diesel, gasoline and jet from upgraded pyrolysis oils. However,
HTL oils require less extensive upgrading than pyrolysis oils. This is due to their lower water and
oxygen and higher energy contents. Also, HTL is well suited to process wet biomass.
Barriers to deployment
The most serious of the technical barriers currently facing this route is the lack of upgrading
demonstration activities, with refineries in the real-world. Hydrothermal liquefaction plants face
other challenges related to catalyst performance and efficiency, product quality, and
disposal/treatment of high volumes of waste water. Other barriers are very similar to pyrolysis oil
upgrading, see section 2.3. These include a lack of sufficient policy support.
Commercialisation potential
Developers claim that with further optimisation, it will be possible for the upgrading step to use
standard refining processes to produce gasoline, diesel and jet fuel. It is expected that HTL oils could
be used at high blend percentage in refinery FCC units, and with mild hydro-deoxygenation, it might
be possible to co-process the bio-crude with fossil crude oil in the front end of existing oil refineries.
The high energy density of the intermediate bio-crude provides the potential for economic
transportation to a much larger off-site refinery. However, developers expect that HTL oil testing in
refineries will be 5-10 years behind pyrolysis oils (as there are not sufficient volumes available yet to
run testing campaigns), and hence the integrated technology may struggle to reach TRL 8 by 2030. In
addition, there are currently no UK commercial actors.
2.13 Anaerobic digestion
Technology status
Anaerobic digestion (AD) is the decomposition of biological feedstocks by micro-organisms, usually in
the absence of air (oxygen). The decomposition of the feedstock produces a gas comprising mostly
methane and carbon dioxide. AD technology is well developed and mature technology (TRL 9), with
thousands of plants in operation in Europe, generally using wastes including food, crop residues and
manure.
Methane produced from biogas can be used in HGVs directly (see earlier section), or converted to
other fuels, including hydrogen, methanol or liquid fuels, such as diesel and jet. Given the small scale
of AD plants and large scale of liquid fuel production processes, there is most interest in addition of
biomethane to the natural gas grid, with production of liquid fuel at a centralised larger plant. This is
currently done in the Netherlands, where methanol is produced from natural gas from the gas grid,
with contracts for biomethane supply at a different location.
Benefits
Biogas routes have typical GHG savings of over 80% according to the RED, when converted to CNG.
GHG savings of routes with further conversion steps will depend on the route used.
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Barriers to deployment (financial, technical, supply chain, demand)
Barriers to projects producing biogas through AD for use in the transport sector are typically related
to the available returns, availability of project finance, and project-specific factors such as feedstock
sourcing, infrastructure and siting25. However, developers of biogas projects not aiming at the
transport sector have overcome many of these barriers to grow rapidly in the last few years under
support from the Renewable Heat Incentive (RHI).
Commercialisation potential
For production of transport fuels to be attractive to developers and operators of AD plants, the
production of the fuel needs to be more commercially attractive to them than electricity generation,
use in a combined heat and power (CHP) plant or upgrading and injecting to the grid and
receiving payments under the RHI. A comparison of these options in 201525 considered that, at
under current levels of RTFC prices, and current levels of support available in the heat and power
sector, that the supply of biomethane into the transport sector would be viable from existing
plants, but would be unlikely to increase by 2020. However, this could change rapidly depending on
on the future levels of support under these policies, and the potential inclusion of methane under
the development fuels sub-target.
25 Ricardo-AEA 2015 for DfT “Biomethane for Transport from Landfill and Anaerobic Digestion” https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/416002/biomethane-for-transport.pdf
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2.14 Summary
The table below shows the extent to which each routes meets the criteria set out at the beginning of this section, based on the information given in the
sections above. Entries in green meet the criteria fully, those in yellow would require further conditions to be made for inclusion in a competition, and
those in red would not meet the requirements of the competition as envisaged here. Routes with entries in red are not considered further in this report.
Route Application - could the fuel be used
in aviation/HGVs?
Status - Is the level of
development suitable for a
competition?
Economic value – would UK
resources allow further
commercialisation? If not,
are there technology export
possibilities?
Additionality - Would this happen in the UK under
proposed market support alone? If not, could there
be other benefits?
Gasification
to diesel or
jet
Yes – as both a diesel and jet fuel
substitute
TRL 5-6 Yes – can use a range of UK
resources
Unlikely to happen – route is more expensive, capital
intensive and risky than other development fuels
proposed, and developers’ first plants are unlikely to
be in the UK
Gasification
and catalytic
conversion to
ethanol,
methanol
Ethanol can be used in ED95, or via
ethanol to diesel or jet (E2D/E2J)
To guarantee this would an end use
partner/ offtake (HGV company,
E2D/E2J company) would be needed.
Little work on use of methanol in
HGVs
TRL 8 – would have longer
development time and
capex requirements
Yes – can use a range of UK
resources
Very unlikely to happen in the UK, if not in
development fuels list, particularly given that it is
likely to be supported in the US and other EU
countries. Also would be very unlikely to be used in
HGVs.
Gasification
to methane,
hydrogen
Yes – HGV partner needed. Methane
HGV partners would be possible. For
hydrogen this would be difficult.
TRL 6-7 for methane, with
hydrogen expected to be
similar
Yes – can use a range of UK
resources
Potential for further production of methane given
current UK demo activity. Hydrogen is unlikely as not a
priority for either gasifier companies or hydrogen
project developers
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Route Application - could the fuel be used
in aviation/HGVs?
Status - Is the level of
development suitable for a
competition?
Economic value – would UK
resources allow further
commercialisation? If not,
are there technology export
possibilities?
Additionality - Would this happen in the UK under
proposed market support alone? If not, could there
be other benefits?
Gasification
and
fermentation
to ethanol
As above for ethanol
TRL 7-8 based on one non-
operational demo plant
Yes – can use a range of UK
resources
Very unlikely to happen as there are few active players
Pyrolysis and
upgrading to
diesel/jet
Yes - both TRL 8 for pyrolysis oil
TRL 5-6 for upgrading in FCC
in oil refinery
TRL 4-5 Upgrading through
hydro-deoxgenation
Yes – can use a range of UK
resources
Unlikely to happen – route is at an earlier stage of
development than other development fuels proposed
Sugar to
hydrocarbons
Yes - both TRL 4-5 from LC sugars Yes – can use a range of UK
resources
Unlikely to happen - only a few significant players
who are unlikely to come to the UK
LC ethanol As above for ethanol
For agricultural residues
there are several
commercial plants globally,
but none in the UK - TRL 8
MSW and wood - TRL 6
Yes – can use a range of UK
resources, although
agricultural residues and
MSW most likely in the near
term
Very unlikely to happen in the UK, if not in
development fuels list, particularly given that it is
likely to be supported in the US and other EU
countries. Also would be very unlikely to be used in
HGVs.
LC butanol Can be used via butanol to diesel or
jet (B2D/B2J)
TRL 4-5 from lignocellulosic
sources, TRL 5 from non-
cellulosic wastes
Yes – can use a range of UK
resources, although
agricultural residues and
Very unlikely to happen in the UK, if not in
development fuels list, particularly given that it is
likely to be supported in the US and other EU
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Route Application - could the fuel be used
in aviation/HGVs?
Status - Is the level of
development suitable for a
competition?
Economic value – would UK
resources allow further
commercialisation? If not,
are there technology export
possibilities?
Additionality - Would this happen in the UK under
proposed market support alone? If not, could there
be other benefits?
Investigation of use in HGVs
To guarantee this would need an end
use partner/ offtake (HGV company,
B2D/B2J company)
MSW most likely in the near
term
countries. All players’ main focus is not LC feedstocks
or the UK. Also would be very unlikely to be used in
HGVs.
Hydrogen
from
electrolysis
Possible for HGVs in the future but
difficult now. Buses, vans are
possible
Electrolyser at TRL 9
Other parts of the system
are at an earlier stage
Yes – using UK renewable
electricity resources
Unlikely to happen to a very large extent, as hydrogen
transport projects are focused on siting near the user,
not renewables
HVO/HEFA Yes - both Commercial (TRL9) for HVO,
with HEFA at TRL8
Limited resource UK and
globally from feedstocks that
would count as development
fuels
Development fuels support (when qualifying
feedstocks used) would be enough to support this
route.
Other
RFNBOs
Power to
methane
Power to
liquids
Yes – both
However, most existing players are
not focusing on diesel
Apart from one developer at
TRL 8, the TRL of others is at
5
Widespread UK deployment
unlikely large sources of very
cheap renewable electricity
are required to make
economics viable
Export possibilities are limited
as no known non-academic
players in the UK
Would be unlikely to happen, unless a region has a
particular interest to demonstrate the use of surplus
renewable electricity
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Route Application - could the fuel be used
in aviation/HGVs?
Status - Is the level of
development suitable for a
competition?
Economic value – would UK
resources allow further
commercialisation? If not,
are there technology export
possibilities?
Additionality - Would this happen in the UK under
proposed market support alone? If not, could there
be other benefits?
Waste-based
fossil fuels
Yes – both if to diesel/jet TRL 7-8 from waste gases.
TRL of others as high as the
corresponding bio route
Range of resources using
waste carbon gases and MSW,
though proof of sustainability
required
Not known – depends on support for this fuel type
Alcohol to jet
and diesel
Yes - both Ethanol to ethylene is a
commercial technology (TRL
9)
LC alcohol to hydrocarbon at
TRL 5, but could be scaled up
quickly due to known
commercial processes
The UK is not the ideal place
to site a large plant – more
likely to site in a region with
multiple ethanol/butanol
plants. However, smaller
plants are possible, and there
is UK interest in this route.
Would be unlikely to happen as the economics is
currently prohibitive
Hydrothermal
technologies
Yes – both Production of HTL oil is at
demo scale (TRL 6)
Upgrading of HTL oil is only
at lab scale (TRL 3-4)
Yes – can use a range of UK
resources
Unlikely to happen – route is at an earlier stage of
development than other development fuels proposed
AD Can be used in CNG or LNG HGVs
today
Future options exist for conversion
to liquid fuels or hydrogen
AD is commercial - TRL 9 Yes – can use a range of UK
resources
Likely to happen under existing support mechanisms,
depending on the relative benefits of use of
biomethane in power, heat and transport and on
inclusion in the development fuels sub-target
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3 Business case
3.1 UK value and jobs analysis
Significant growth is expected in advanced renewable fuels markets globally. UK deployment of
advanced renewable fuels facilities will support UK revenue generation and jobs, but innovation and
demonstration support could also create additional economic value by helping UK-based businesses
to develop competitive advantages and compete successfully in non-UK markets. We have therefore
developed a simple set of calculations and assumptions to estimate the value to the UK of
deployment in the UK, plus taking a small share of the global advanced renewable fuels market, using
a similar approach to that used for the ABDC.
Two scenarios are given: a ‘current planned plants’ scenario based on plants that are currently
planned, and potential subsequent plants from the same developers, taken where possible from
parallel E4tech work for DfT on advanced biodiesel. A high scenario is also given, based on E4tech
analysis for a 2016 study for the European Commission26, which is derived from the IEA’s 2015
Energy Technology Perspectives 2 degree scenarios. These scenarios vary by an order of magnitude
in 2030, reflecting the difference between
the small number of projects currently planned - for technologies that are mostly pre-TRL 8, with
uncertain policy support, and given competing advanced fuel options, such as lignocellulosic
ethanol and
the volumes of fuel that are expected to be needed to contribute to emissions reduction
sufficient to meet a 2 degree scenario. This would require a favourable policy framework is
favourable, technologies to be rapidly proven and diffuse rapidly thereafter on a licensing basis
These scenarios include those routes where projections are available or can be estimated:
gasification-based routes to diesel and jet, pyrolysis and upgrading, sugars to hydrocarbons,
hydrothermal liquefaction, upgrading of alcohols, direct use of alcohols in HGVs, gasification to
methane and hydrogen, and waste-based fossil fuels using waste carbon gases. The other routes in
scope for which no projections are available or easily made are other RFNBOs, where the potential
will depend heavily on electricity prices and grid constraints, and other waste-based fossil fuels,
where the potential will depend heavily on the sustainability of individual projects. The potential for
these routes would be additional to the figures given below. Note that the markets given are for
these routes to diesel and jet substitutes, not for all advanced renewable fuels. This means that the
figures are not directly comparable with those from the ABDC feasibility study. The figures given here
are considerably lower in 2020, given the exclusion of LC ethanol (unless converted to diesel/jet)
which is the main advanced route deployed today.
Global deployment figures are used to estimate the potential net value added (NVA) contribution to
the UK economy across the various supply chain options, from feedstock, through technology
construction and operation, to downstream distribution of finished fuels. In the Current planned
26 Prospective for Future Production of Non-Crude Liquids November 2016, Nexant and E4tech, https://ec.europa.eu/energy/sites/ener/files/documents/ec_noncrude_liquids_publishable_executive_summary_final_1nov2016.pdf
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plants scenario 46 commercial-scale plants are built by 2030 producing the fuels via the routes in
scope above, producing 4 mtoe/yr of fuel. In the High scenario this increases to 500 commercial-scale
plants, producing 60 Mtoe/yr of fuel.
Global turnover figures are calculated by using estimated advanced renewable fuel prices (£25-35/GJ
in 2020 falling to £20-30/GJ by 2030). This ranges from £3 – 75bn a year by 2030, with feedstocks
accounting for around 40-45% of this value, technology capex and opex 42-50%, and downstream
distribution 10-13%.
The methodology for calculating the value to the UK and jobs is adapted from the Bioenergy TINA for
Carbon Trust, as in the previous feasibility assessment for the ABDC.
Development of a domestic industry will provide significant value to the UK. UK deployment figures
in the absence of the competition are based on plants currently planned to be in the UK in the
Current planned plants scenario, which are zero in 2020. In the high scenario, it is assumed that the
competition, as well as a favourable policy environment and global technology success, leads to
plants from several developers being built in the UK, using the same approach as in E4tech’s work for
DfT on advanced biodiesel. These estimates give between 4 and 21 commercial-scale advanced fuel
plants built in the UK by 2030, at a range of scales, producing 0.35 – 2.0 Mtoe/yr of fuel (providing 1-
4% of UK transport demand, ignoring any multiple counting). UK turnover figures are then calculated
to range from £300 –2,600m a year by 2030. Based on these assumptions, the successful
establishment of a domestic UK advanced renewable fuels industry could generate a NVA of £47 –
400m a year by 2030 (including displacement effects).
The successful capture of global advanced biofuel business opportunities could generate millions of
GBP in value for the UK. The UK net value added of global exports from the different possible
technology choices is estimated at between £8 and 195m a year by 2030 (including displacement
effects), with the large majority of the value found in the design and development of conversion
technology components – since these are more exportable, protectable through IP and well-aligned
with the UK’s academic and commercial strengths. Combined with the NVA from UK deployment, the
total size of the prize for UK advanced renewable fuels could reach £55 – 600m a year by 2030.
The successful establishment of a domestic UK advanced renewable fuels industry could generate
900 – 7,700 new jobs within the UK by 2030, with a strong focus on feedstock supply. Increased
exports for the accessible global market could generate another 90 – 2,100 UK jobs by 2030, leading
to a total employment opportunity of 1,000 – 9,810 UK jobs within the advanced renewable fuels
sector by 2030.
3.2 Impact of the Competition
The above analysis gives possible ranges for the deployment of advanced renewable fuels in the UK
and globally. However, whether the UK values are realised depends on whether a handful of planned
projects go ahead, and which developers are successful in demonstrating their technology, raising
finance and scaling up.
The value of the proposed Competition is therefore framed around the successful UK demonstration
of one technology in the 2020 timeframe, additional to those funded through ABDC. After 2020 2-4
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further demo scale plants are built, with these demo plants leading to 3-5 commercial scale plants by
2030 in the UK.
Based on an unknown technology choice, one demonstration plant (producing 1.3 ktoe/yr) could
lead to turnover of up to £2m a year by 2020. Adding 2-4 new demo plants of varying scales by 2030
increases the cumulative deployment unlocked by the Competition to 4 – 20 ktoe/yr. 3-5 new
commercial plants based on these demo plant increases the cumulative deployment unlocked by the
Competition to 250 – 430 ktoe/yr, and turnover to approximately £210 – 545m a year.
The NVA and employment impacts potentially resulting from the Competition are shown in Table 2,
based on only considering non-tradable UK portions (and no global export figures), due to the
deployment being assumed to be in the UK.
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Table 1: Summary of the potential UK value and jobs from the advanced renewable fuels industry
(Currently planned plants – High)
2020 2030
Global deployment (Mtoe/yr) 0.1 – 0.5 3.6 - 60
UK deployment (Mtoe/yr)27 0 - 0 0.4 – 2.0
UK deployment (% of transport
fuel demand)
0 - 0 0.7 – 3.8
Global number of plants28 8 - 30 46 - 500
UK number of plants28 0 - 0 4 - 21
Global turnover (£m/yr) 110 - 780 3,000 – 75,000
UK turnover (£m/yr) 0 - 0 300 – 2,600
UK NVA from exports (£m/yr) 0.3 – 1.9 8 - 195
UK NVA from domestic (£m/yr) 0 - 0 47 - 400
UK NVA total (£m/yr) 0.3 – 1.9 55 - 600
UK jobs from exports 3 - 20 90 - 2100
UK jobs from domestic 0 - 0 920 – 7,700
UK jobs total 3 - 20 1,000 – 9,800
Table 2: Summary of potential Competition impacts (Currently planned plants – High)
2020 2030
Deployment (ktoe/yr) 1 - 1 250 - 430
Number of plants 1 demo Additional 2- 4 demo and 3-5
commercial
Turnover (£m/yr) 1.3 – 1.9 210 - 545
NVA domestic (£m/yr) 0.2 – 0.3 38 - 98
Domestic jobs Cannot be estimated by this
methodology. Expected to be
around 50
690 - 1750
27 NB This is deployment from commercial plants only, and does not include demo plants funded through the ABDC 28 NB Plant scales vary over time and by developer
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4 Feasibility of supporting these technologies
This sections consider whether a competition could feasibly support projects based on these
technologies, in terms of:
Whether the technologies are at the appropriate stage of development for support by a
demonstration competition, and whether they could deliver a fuel product at a suitable scale for
fuel testing
What type of prospective applicants there might be for each technology
Whether there are significant risks to a competition focused on these routes
4.1 Technology status
As shown in Section 2, the technologies considered suitable for a demonstration competition have a
range of technology readiness, with the most advanced players being at TRL 8 – first commercial
plants. However, for some routes the most advanced players are at a much earlier stage, and for all
routes there are players at earlier stages, with variations in technology or with a different feedstock
focus. The table below summarises the progression that could be expected via the competition for
each route. For each route, progression at an earlier TRL could also be possible for players at an
earlier stage of development.
Progression via competition Route
Within TRL8: e.g. UK deployment of a
technology with a first commercial plant
elsewhere, operation on different
feedstocks, use in different vehicle types
Fermentation of waste or LC sugars to ethanol
Gasification and catalytic conversion to ethanol,
methanol
To TRL 8: First of a kind commercial
system
Waste-based fossil fuels
Gasification to diesel or jet
Gasification to methane, hydrogen
To TRL 7: Demonstration at pre-
commercial scale
Fermentation of waste or LC sugars to butanol
Alcohols to diesel/jet
Pyrolysis and upgrading to diesel/jet
To TRL 6: Small scale demonstration plant Sugar to hydrocarbons
Other RFNBOs
Gasification and fermentation to ethanol
To TRL 5: Pilot plant HTL with upgrading
Any route
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The number of potential bidders to this competition may be lower than in the ADBC, as a result of
the narrowed range of transport applications targeted, the focus of many developers on regions
other than the UK, and uncertainty over the European policy landscape and impacts of Brexit. In
order to maximise the number of potential bidders, the range of TRLs targeted should be kept as
broad as possible, with the exception of a minimum TRL level and scale. This is for two reasons:
A minimum scale is desirable such that enough fuel can be produced to enable testing for the
targeted applications. The volume of fuel required depends on the scale of testing (fuel
properties, engine testing, on and off-road vehicle testing) and on the application, but as an
example, engine testing on an HGV would typically require at least 1000l of fuel – meaning that a
pilot plant (TRL5) is the minimum acceptable scale. For other fuels a larger scale may be
appropriate – for example testing pyrolysis oil in a refinery would require at least 8000l of
pyrolysis oil. Rather than setting a value for the minimum scale, it would be better to require
applicants to state what testing is appropriate and that the scale proposed matches the
requirements of that testing
A minimum TRL (progress to TRL 6) ensures that the selection criteria and monitoring criteria for
the competition can be common to all bids. Earlier stage RD&D may be more appropriate for
funding via an alternative mechanism, such as through research council, Innovate UK and EU
Horizon 2020 funding. Allowing bids at lower TRLs reduces the business case for the investment
itself, in terms of near term numbers of jobs, and value to the project developer, but widens the
range of potential bidders. This may result in an increase in the number of UK bidders, thus
potentially increasing the UK benefits in the longer term. See section 5.1 for a discussion of
relevant State Aid considerations for bids with lower TRLs, including rules around aid intensity
and maximum grant awards.
Supporting plants moving to TRL 8, or that are already at TRL 8 outside the UK, moves beyond what
was envisaged in the ABDC. According to TRL definitions, TRL 8 plants would not be considered a
‘demonstration’. However, considerable challenges remain to the commercial success of advanced
biofuel plants globally, not only linked to future policy uncertainty, but also to the challenges of
establishing feedstock supply chains, proving new technologies at scale, and ensuring reliable
operation. Demonstrating that a TRL 8 plant can be built successfully in the UK could pave the way
for future UK deployment, with associated GHG saving and economic benefits. These plants will have
higher investment costs and longer timescales for development than TRL 6-7 plants, which are
considered further in section 5.
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4.2 Prospective applicants
There are a variety of potential types of bidder, which depend on the route, the degree of existing UK
activity, and the attractiveness of the UK compared with other locations. Most bids are likely to
require a consortium with representation across the supply chain. These could be led by:
Technology developers. This is more likely for technologies at earlier TRLs
Feedstock company-led, such as waste management companies
Other stakeholders with an interest in developing the conversion technology such as a fuel user
Since the number of technology pathways that may be delivered entirely by UK technology providers
is limited, it is therefore expected that consortia will include (if not be led by) non-UK companies.
The likelihood of bidders from each of the routes considered, and the geographical origin of those
bidders is indicated below. This is based on a review of the know technology developers in each
route, and a judgement on their likely interest in the UK compared with other regions, given their
stage of development and capacity to conduct projects in multiple regions.
Likelihood of
bidders
Technologies and regions
High
Fermentation of waste or LC sugars to ethanol – UK and EU
Waste-based fossil fuels - UK and ROW
Gasification to methane, hydrogen – UK and ROW
Medium
Gasification and catalytic conversion to ethanol, methanol - ROW
Pyrolysis and upgrading to diesel/jet - UK, EU and ROW
Fermentation of waste or LC sugars to butanol – UK and ROW
Gasification to diesel or jet – EU and ROW
Alcohols to diesel/jet – UK and ROW
Low
Sugar to hydrocarbons – EU, ROW
Other RFNBOs – EU
Gasification and fermentation to ethanol - ROW
HTL with upgrading
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5 Funding structures
This chapter reviews the existing State Aid Regulations which determine the types and amounts of
Government funding that are permissible within the European market in order to identify the most
appropriate category of aid for a potential new competition.
The study then reviews possible options for structuring this aid in line with the Regulations and to
maximise the number of high quality applications and eventual successful projects.
5.1 Review of updated State Aid Regulations
Regarding the use of State Aid routes for grant funding, much depends on the timescale for
development and launch of a scheme. Longer term programmes (such as those run by the Carbon
Trust, TSB and ETI) have all applied for a specific full State Aid exemption using the full notification
procedure which allows for maximum control over the design of the scheme, but requires in-depth
justification of the requirement for market intervention. Within UK Government Departments, DECC,
Defra, BIS and DfT have all used State Aid General Block Exemption Regulations to deliver grant
funding schemes with a shorter lead-time.
The European Commission’s State Aid regulation is designed to prevent Government funding from
causing unfair competitive advantages within a given market. In designing a funding scheme to
support demonstration projects, there are a number of routes available that will comply with State
Aid legislation, including block exemptions and a full notification procedure, which is known as an
individual exemption.
General Block Exemption Regulations (GBERs) provide a list of specific conditions under which
Member States may launch a funding scheme without being required to complete the full
notification procedure. Provided the block exemption conditions are met, the programme manager
may simply notify the Commission via a retrospective transparency notice. In the event of a very
large individual award being made, a notification must still be made to the Commission – even when
the scheme under which the award has been made satisfies all of the requirements of GBER.
If it is not possible to comply with all the conditions of a block exemption, the program manager
must apply for an individual exemption using the full notification procedure which can take at least
3-6 months.
5.1.1 Background on update of Regulations
The Commission launched a consultation on the 18th December 2013 on the implementation of
updated State Aid Guidelines for assessing public support projects in the field of energy and the
environment. The General Block Exemption Regulations were formally updated on 17th June 2014
which expanded the number of exemptions from 26 to 33. The updates focused on ensuring Member
States have adequate safeguards in place to limit distortions of competition and to avoid subsidy
races between Member States.
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5.1.2 Relevant General Block Exemption Regulations (GBER)
Continuing from the GBER used for the first round of the ABDC, Article 41 (Investment aid for the
promotion of energy from renewables) remains the most relevant GBER for a new round of the
competition. The table below summarises the key points of Article 41. In particular, Article 41
contains specific provisions for biofuel production from sustainable feedstocks and covers other
renewable fuels.
Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity
bonuses
Maximum
Threshold
Article 41 –
investment aid
for the
promotion of
energy from
renewables
For new installations only.
Eligible Costs – the extra
investment costs to promote
the production of energy
from renewable source.
Restrictions apply regarding
biofuels which must use
sustainable feedstocks that
are non-food-based.
Aid intensity
may be set by
the funder
subject to the
process being a
competitive
application
+ 20% for small
undertakings;
+ 10% for medium-
sized undertakings.
+ 15% for Assisted
Area (a);
5% for Assisted
Area (c).
15m Euros per
recipient, per
project.
The table in Appendix A provides an overview of all the exemptions under the Regulations that could
potentially be relevant to projects funded by a new competition. An individual project could rely
upon any combination of the exemptions, subject to the accumulation rules.
Accumulation rules
Aid granted under one GBER exemption may be accumulated with aid under a different GBER
exemption in relation to the same identifiable Eligible Costs, partly or fully overlapping, only if such
accumulation does not result in exceeding the highest aid intensity or aid amount applicable. This
multiple GBER approach is taken in current funding schemes such as the Scottish Government’s
Local Energy Challenge Fund, which allows a large range of different project types to utilise the
eligible technologies and costs for 11 different GBERs to determine the best ‘fit’ for their projects.
Regarding the definition of Advanced Fuels as discussed in Sections 2 and 5 of this study, the new
competition could be open to applications to produce waste-based fossil fuels: a fuel that is derived
from non-biological waste and therefore not a biofuel. Initial indications from the Regulations are
that State Aid for waste re-use or recycling contributes to environmental protection when the
materials treated would otherwise be disposed of, or be treated in a less environmentally friendly
manner (paragraph 66). It would be the responsibility of any applicant to the new competition to
determine their compliance with State Aid Regulations if the potential project fell outside the scope
of Article 41 (Investment aid for the promotion of energy from renewable sources).
Other GBERs of note are Article 22 (Aid for Start-Ups) and Article 25 (Aid for research and
development projects). Aid for Start-Ups can potentially cover a range of seed-funding style funding
activities, and start-ups did apply to the ABDC. Aid for R&D would be highly relevant if technologies
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with lower TRLs were eligible to apply. These GBERs are discussed in more detail in sections 5.2.3 and
5.2.4.
5.2 Funding Options for a new competition
5.2.1 Existing scheme structure for the Advanced Biofuels Demonstration Competition
The first round of the ABDC was exempted from State Aid notification under Article 41: Investment
aid for the promotion of energy from renewables. Grant awards were for a maximum of 50% of
eligible capital cost (uplifts applied of 10% for Medium Enterprises, 20% for Small Enterprises, 15%
for Assisted Area (a) and 5% for Assisted Area (c)). Grants were capped at EUR 15 million, which
equated to £10,958,194 at the 5th September 2015.
Grants were awarded via a 2-stage competitive process and notification letters were sent to
successful bidders. Carefully crafted bespoke special conditions were negotiated and included in
Grant Offer letters to minimise risks to DfT of projects spending money which was later found to be
abortive. For example, some of the Grant Offer letters included stage gates before any funds could
be released, and conditions were incorporated so that even if the second and subsequent follow on
plants were to be built outside the UK the profits for any licences would be taxed in the UK.
Accountable Grant Arrangement (AGA) letters were issued in due course, coinciding with a
Ministerial Announcement of the awards. Signed AGA letters were returned to DfT for
countersignature.
AGAs set out award conditions specific to each project and the grant claim schedule as determined
during AGA negotiations. Grant was paid on the basis of submitted evidence of defrayed costs,
combined with achievement of progress milestones. Stage gates were defined for each project to
form major go / no go decision points for the project and for DfT as the funder. Claim frequency
varied from monthly to 6-monthly depending on the complexity and desired claim approach of each
project.
5.2.2 Assumptions for a new competition
A new competition will involve £20m of capital to be spent over 3 years (FY 18/19 – 20/21).
Options for how to use £5.5m of additional capital funding to be spent over 1 year (FY 17/18) are also
considered, although the main focus will be on the options for the £20m.
Regarding the number of projects that DfT would look to support, we have made suggestions of a
likely project pool for each of the options reviewed.
It is assumed that the DfT prefer to seek a Delivery Partner with appropriate experience of scheme
design for the overall management of the new competition, rather than develop the scheme in-
house.
It is assumed the new competition will follow the best practice of using defined eligibility criteria to
complete an initial screening of applications, scored assessment criteria to determine an overall
ranking of applications, and make use of an Expert Selection Panel and Project Board to confirm final
award recommendations to Ministers.
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Where ‘demonstration-scale‘ is referred to in the following sections, this refers to any technology
ranging from TRL 5 (very small demonstration) to TRL 8 (early commercial plant).
5.2.3 Options for £5.5m of funding over 1 year FY 17/18
This section reviews options for short turn-around projects that have the potential to complete
spend by March 2018. It is feasible for more than one of these options to be taken forward.
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No. Description Pros Cons Grant per
project
Potential
applications
and relevant
GBER
1 Add-on funding for existing projects.
The rationale being that the change in
the exchange rate since September
2015 would allow grantees to receive
more GBP funding under the EUR 15m
cap, plus existing projects have seen
cost increases for additional items.
The current exchange rate gives £12.6m
as the maximum award under Article
41. At the time of grant award, the
maximum cap was £10.9m.
Existing projects have seen cost
increases that exceed the limits
of their existing matched-
funding and risk project failure.
Applicants would need to
provide evidence of these cost
increases, showing clearly how
they are in addition to the
projected costs from their
original plans. An addendum to
the original grant offer would
be needed to increase the
value of grant being offered.
Other biofuel players may see
this as unfair and complain that
funding should be open to new
bidders if this is the only option
taken up.
DfT may face questions of
additionality when funding
existing projects although the
evidence of cost increases
should mitigate this risk.
Between
£0.7m and
£1.6m, up to a
total of £2.3m
within the
permitted aid
intensities.
High
Article 41: as
an additional
add-on cost
2 Funding for modifications to an existing
plant to process advanced biofuel
Allowances for upgrades or
add-ons are within State Aid
Exemptions. These projects
should spend earlier than new-
build projects as they are
working with existing or part-
built plants
There may still be specialist
equipment orders with very
long lead times. Projects could
be funded up-front in FY17/18
and continue while the main
fund is still functioning, thus
reducing the risk that projects
will run into issues after
FY17/18 without any oversight.
Potentially £2-
4m
Medium
Article 41
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3 Accept applications from pilot plants
(TRL4-5)
A much smaller plant could
feasibly begin construction
within 1 year
Risks around matched funding,
planning permission and other
delivery challenges. Applicants
would need to be well-
developed in their plans.
Projects could be funded up-
front in FY17/18 and continue
while the main fund is still
functioning, thus reducing the
risk that projects will run into
issues after FY17/18 without
any oversight.
Potentially
£1m
Low
Article 41
4 Seed funding to enable project concepts
to develop
e.g. funding over 6-9 months for FEED
studies, project costs development,
partnering arrangements, feedstock and
off-take arrangements, full and detailed
GHG calculations, full Life Cycle
Assessments, and building the business
case evidence for future commercial
potential.
Delivery Partners could provide access
to expertise that the project concepts
wouldn’t otherwise have (access to
engineering and design expertise,
Increases quality of
competition for CAPEX grant
funding. All deliverables would
increase the chances that other
investors will react positively to
the project, and may mean that
some projects progress without
the need for grant funding at
the CAPEX stage.
Successful examples of seed
funding can be found in both
the Local Energy Challenge
Fund (Scotland) and ETI Waste
Gasification Fund, where a
number of projects proceeded
Funding would be spent without
any guarantee that CAPEX
projects would be developed
and advanced fuels delivered.
Additional risk that the actual
plant is developed outside the
UK
For seed funding for renewables
with a £20m grant awarding up
to £100k over 6 months, the
Scottish Government received
66 applications for seed funding,
and supported 23 projects.
Applications for full funding
were then received from 18
This option
could
potentially
fund 3-10
projects. The
size of the
grant awards
would be
limited by the
ability to
deliver work
by March
2018.
High
Article 21 (up
to £0.8m Euro
as ‘innovative
enterprises’)
Article 22 (up
to £7.5m Euro
for 50% of the
costs of a
Feasibility
Study)
De Minimis
State Aid (if
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commercial expertise, GHG expertise,
access to investor networks etc).
Applicants could propose their own
level of grant request, along with a
justification of how the money would
be spent by March 2018, with a cap of
around £2m to avoid spending all of the
budget on a small number of projects.
This is larger than in other seed funding
projects in the UK, which have typically
been at up to £300k, but in the same
range as projects recently awarded by
the US DoE29. There would be likely to
be a range of projects from £50k
upwards.
to completion without the need
for further grant funding after
support to develop the project
to an investment-ready state.
projects, and 9 were awarded
grants totalling £20m. The
outputs of the 23 projects were
viewed as having added value to
the initial concepts.
The ETI typically supports a ratio
of 3 projects seed funded for
every 1 project that gets full
funding support, stating that
seed funding brings added value
in attracting other investors to
have an impact larger than the
original investment from ETI.
the grant is
under 0.2m
Euro)
29 A US Department of Energy (DoE) fund for project development and planning for advanced biofuel plants has been announced (http://www.bioenergy-
news.com/display_news/11598/us_doe_announces_plan_to_back_biofuels_and_biopower_projects/) with grants of USD 0.8 – 4.0 m per project for the project
definition phase. Initial information seems to indicate that this budget needs to be spent before a Phase 2 decision is made in Oct 2017-Sept 2018 (US Fiscal year 2018).
This will be followed by Phase 2 funding at a 50% cost share for pilot and demo scale facilities, with funding levels of up to $15m and $45m USD respectively.
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Recommendation for £5.5m funding over FY 17/18: The two options most likely to produce
applications and successful projects within the timescales are options 1 and 4. The application
window could be short (3 months) and decisions made in a single evaluation stage, thereby
awarding grants during late-spring 2017 and giving grantees up to 9 months to deliver their
projects, complete all spend, and claim the grant monies before March 2018.
5.2.4 Options for £20m of capital funding over 3 years FY18/19 – 20/21
Options for a new competition build on the successes of ABDC and the lessons learned through that
process. Each option has been examined for its advantages and disadvantages, and the likely impact
on the number and quality of applications.
1. Standard CAPEX grant for demonstration-scale advanced fuel plants, paid in arrears on a
milestone basis, with an update that grant offers are not countersigned by Government until all
matched-funding is in place. The grant offer would also include a request for DfT to be party to other
investor due diligence meetings/activities, in order to give them comfort that the investment is going
to be placed, be aware of the timescales for due diligence completion, and so that they are aware of
any implications of other T&Cs that the project may be being asked to comply with. This is a direct
learning from ABDC.
Pros:
- DfT is protected from spending money on failing projects as grant is only paid out once
capital has been expended and progress milestones achieved.
- This puts pressure on projects to finalise matched-funding arrangements as the grant offer
would contain a time limit that cannot be breached, and the funds would then transfer to a
reserve project. The grant offer is often the conditional trigger point for other investors
confirming their commitment. Ministers may be uncomfortable with the uncertainty of
holding a grant offer but this approach will put them in a strong position for any audits by the
NAO and keeps the pressure on other investors to commit. Specific time limits would have to
be negotiated with each grantee on the basis of the status of their matched funding
arrangements.
Cons:
- The milestone approach tends to lead to delays in grant spend as progress can easily be held
up by a variety of issues. Very difficult to accurately forecast grant spend. However, this can
be managed if money is transferred to a third party or bank that the DfT can authorise
payment from.
Number and quality of applications:
- Likely to receive between 10 and 20 applications due to the wider definition of advanced
renewable fuels and current levels of activity in the advanced fuels market. This is a
constrained estimate given the proposed requirement for advanced biofuel applications to
include committed off-take partners (for specific routes). It is likely that many applications
will have some development needs and will be project concepts rather than well-developed
plans (as was seen in ABDC Stage 1 applications).
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- £20m could support between 3 and 5 projects, depending on the final mix of plant sizes. Due
to the wider scale of this new competition, small-scale demonstration plants would apply for
grants between £1m-£5m, while others may apply for up to £10m. The major determining
factor in the number of projects in the new competition will be which scale of plant is
appropriate to progress the technology and demonstrate the production of fuel. The lesson
learned from ABDC was that a plant that can produce at least 1m litres of biofuel per annum
was larger than was needed for technology demonstration in all 3 cases. We would therefore
expect to see a larger number of smaller projects in the new competition.
2. Standard CAPEX grant plus seed funding: Standard CAPEX grant following the structure of (1)
above, but with up to a maximum of £2m (expected average of around £100k) awarded to each
shortlisted bidder after a competitive Stage 1 application process to be spent over 6-9 months on
background research or work that will develop the strength of the offering (i.e. being investment-
ready by Stage 2) e.g. FEED studies, project costs development, partnering arrangements, feedstock
and off-take arrangements, full and detailed GHG calculations, full Life Cycle Assessments, and
building the business case evidence for future commercial potential. The grant would only be
released on the production of valid evidence of work delivered supported by invoices, although
monitoring would be light touch oversight. When the shortlisted bidders are invited to present their
proposals at Stage 2 they should be asked to provide an update on how the money has been spent,
what has been learnt, and what added value has been achieved with the seed funding.
Pros:
- Because the time from being selected for the shortlist to grants being offered was 9 months
on ABDC, grantees were immediately challenged to deliver their completed plants by March
2018 as they had not been able to progress with activities such as FEED or detailed cost
specifications as this could only start once the grant was awarded. A grant between Stage 1
and Stage 2 would allow for vital project development activities to take place which would
maintain momentum towards project deadlines.
- As some of the shortlisted bidders may not be selected, the smaller grant may enable these
companies to have proved a concept possibly enabling them to be financed by other routes.
The ETI is particularly supportive of this approach as they have demonstrated how other
investors can be attracted by a project that has received seed funding to develop a
marketable concept into an investment-ready project.
- Announcing a number of seed grants would give the message to bidders that the DfT is
proactive. It should also result in much stronger bids as evidenced in the Local Energy
Challenge Fund30 where 80% of the Stage 1 applications that were short-listed for seed
funding were not investment ready, compared to an average 115% increase in assessment
scores at Stage 2 for those projects that progressed.
Cons:
- As some of the projects may drop-out after receiving seed funding then it is possible that
some of this seed funding does not provide added value. However, in practice, the
determination of project viability still provides valuable lessons for both the funders and the
potential project delivery partners. The potential advantages for most projects receiving seed
30 http://www.localenergyscotland.org/funding-resources/funding/local-energy-challenge-fund/
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funding would outweigh this and the light touch monitoring supervision with evidence-based
payments would prevent any fraudulent spending of government money.
Number and quality of applications:
- Likely to receive a higher number of initial applications (potentially 25-30) due to the
allowance for project development between Stage 1 and Stage 2 of the application process.
This is likely to increase the quality of applications at Stage 2 and improve the likelihood of
strong investor commitment. It is unlikely that the new competition will see the level of
applications from the Local Energy Challenge Fund (115 in the first competition and 66 in the
second competition) as the scope of eligible technologies for this fund was much wider than
renewable fuels.
- We would still expect to fund 3-5 projects at Stage 2, given the reflections in option (1)
above, but the funding would be at lower risk of project failure given the additional
development work in place before final funding awards are made.
3. Front-loaded CAPEX grant funding for long-term (4-5 year) projects: A higher risk option, we
would recommend this would be applicable only for projects producing over 5 million litres of fuel
per annum that need a longer development timeframe (e.g. 4-5 years).
Pros:
- Allows DfT to fund large-scale projects which could produce high volumes of biofuels with
the UK (e.g. 3 good quality projects were excluded from Stage 1 of ABDC due to the
completion date being beyond March 2018)
Cons:
- Exposes DfT to the high risk of projects failing after the first 3 years, with little protection
against spending Government money on a project that does not complete, other than a claw-
back clause in the grant offer if the project does not go on to completion. This would require
DfT Legal involvement up to 2-3 years after the end of the competition. For example, many
gasification plants have failed at the commissioning stage after experiencing technical
difficulties that require further capital injection into the project. As commissioning is one of
the final stages of project completion, a high level of due diligence and scrutiny of the project
risks would have to be undertaken by evaluators and the Project Board.
- Applications would likely be for the maximum state aid limit under Article 41 (15m Euros) as
the scale of plant would lead to eligible project CAPEX over £20m and so a single application
could take up over half of the grant fund. This may be more risk than DfT is willing to take to
fund a single large project. One possible solution is to limit any applications to £5-8million.
Number and quality of applications:
- Likely to receive a small number of applications from some of the original ABDC applicants
that were excluded due to delivery timescales, and from market players that did not apply to
ABDC because of their expected construction timescales.
- Some of these applications may be quite advanced as plants of this size may have been in
discussions without a funder for a number of years.
4. Repayable CAPEX grant: This would be paid as a low interest loan (repayable once the plant is
producing fuel) that can be written off as a grant if the company fails to have sufficient cash flow to
repay the loan once the project is complete. An example would be for every £1 of net operating
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profit, 5% has to be repaid to the funder. The Energy Technology Institute (ETI) makes all of its
investments on this basis, with the view that this funding model acts as an incentive for people to
exploit the technology they have developed.
ETI Repayable Grant Funding Model
The ETI’s grant conditions state that in return for their investment in the project, the ETI will own
any foreground or arising Intellectual Property (IP) from delivery of the project. Grantees must
then pay the ETI a license fee to use that IP over a period of 5-10 years. The license fee is generally
based on an appropriate indicator of performance, such as product sales or units of electricity
generated. The founding principle is that IP should not be left unused.
It is important to note that Return on Investment (RoI) is not a key driver for the ETI’s investments
(e.g. ETI expect to invest over £30m in 2016/17 with incoming license payments of £0.5m). The ETI
typically funds TRL 2-4 activities and combines Government funds with private sector funding,
allowing up to 100% of the investment costs to be covered by a single source.
Pros:
- Money can be paid upfront or in lump-sums to enable reliable grant spend profiles
- A strong commercialisation and exploitation strategy is critical to funding awards and is
closely monitored by the ETI to ensure their investment brings added value to the market
Cons:
- Only likely to be a viable option for demonstration-scale projects that will have a high
likelihood of expecting a cash flow, or if DfT has a strong interest in owning and licensing IP
up to 10 years in the future
- Legal challenges and complexities with grantees attempting to make a case why the loan
should be annulled, even if second follow on projects will be profitable
- Each grant contract will be bespoke and require a number of months of negotiation. This is a
recognised challenge for the ETI with many of their individual investment contracts taking
over 3 months to negotiate.
- Paying money in lump sums will not prevent other issues that may delay the project or cause
failure, such as equipment delivery delays or planning permission
Number and quality of applications:
- This option could potentially see a reduced number of applicants compared to a non-
repayable CAPEX grant, as applicants may struggle to make the case that their project will be
able to expect a cash-flow sufficient to repay the grant. Applicants with a reasonable chance
of revenues may struggle to identify equity investors who will have difficulties with a reduced
return on their own investment during the lifetime of the repayment terms.
5. A challenge competition: A competitive approach throughout with a lump-sum prize payment for
completion of a project that addresses the challenge(s) identified.
Pros:
- Generates competition and projects striving to adhere to their project plans to achieve
completion within their original deadlines
Cons:
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- All money is paid at the end of each project. DfT are unlikely to want to retain all £20m until
FY20/21 as an extreme example, and as all the projects in the first ABDC round relied on
angel investors and venture capital, it is very unlikely many bidders would be prepared to risk
all the project cost with no guarantee of success.
Number and quality of applications:
- Unlikely to generate sufficient applications to run a competitive process.
Recommendation for £20m capital funding over FY 18/19 – 20/21: The option most likely to
produce sufficient volumes of high quality applications and successful projects within the
timescale is Option 2 (Standard CAPEX grant plus seed funding). If seed funding is instead
supported by the £5.5m funding pot in FY17/18, we recommend the use of Option 1 (Standard
CAPEX grant funding) from the start of FY18/19. The advantages posed by supporting bidders in
the development of their proposals outweigh the potential drop-out rate of unsuccessful bidders
at Stage 2, as the seed funding may enable these companies to have proved a concept possibly
enabling them to be financed by other routes, as seen in other funding schemes.
Combining Options 2 and 3 would expose DfT to more risk, but the ultimate reward is a number of
professionally-designed and planned projects that produce high volumes of UK advanced fuels.
Exposure to risk would have to be a priority evaluation and decision-making criteria for the
assessors and Project Board, but could open up the competition to be an example of high risk/
high benefit funding.
5.2.5 Options not considered suitable for £20m of capital funding over FY18/19 – 20/21
A number of additional options were considered for the £20m fund. These options were found not to
be suitable for a number of reasons, many linked to the technology and commercial risks of
demonstration-scale advanced fuel plants, and also the nature of the unique investment packages
which are inevitable when demonstrating new technologies that traditional investors and banks will
not fund (such as angel investors and venture capital funds). These options were:
1. Setting up a scheme that is aimed at shared ownership or community ownership: Due to
the nature of the risks involved in demonstrating new technology it is unlikely that there would be
many applicants for this type of scheme. Community ownership schemes are starting to gain traction
in commercially available renewable technologies, but are unsuitable for non-commercial
technologies and are very high risk for local or community investment.
2. Government issuing loans at commercial rates: It is highly unlikely that bidders will take up
this option as there is no guarantee of revenue generation from a demonstration-scale plant.
3. Government taking equity shares rather than paying a grant: DfT could take a share of the
company, with a requirement for a product to be sold in a fixed number of years’ time. We
understand DfT is not keen on taking equity shares due to potential conflicts with policymaking,
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although a separate sub-government organisation could be set up. Other investors may also be
deterred as they will end up with a lower proportion of the equity.
4. Government bank guarantees: This would only work potentially for TRL 8 and above,
although funds would need to be ring-fenced until FY 20/21 to pay the guarantee if the project failed.
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6 Summary and requirements for the competition
6.1 Synthesis of findings
This feasibility study provides the information necessary to design and launch a follow up to the
ABDC that specifically focuses on fuels aimed at displacing fossil diesel and jet. The study has shown
that:
There are a wide range of technologies that could produce advanced renewable fuels suitable for
use in aviation and HGVs. Of 15 routes to renewable fuels assessed in chapter 2, twelve were
considered to be suitable for support through a competition, given their potential for future
widespread use in aviation and HGVs, technology development status (TRL 5-8 typically),
potential for UK deployment and expected deployment level in the absence of further support.
Those excluded were all based on technologies already at TRL 9, with some also being likely to
happen without this additional support.
The list of technologies considered suitable includes those that produce a diesel or jet fuel
directly, those with intermediate fuels that require further processing to produce jet or diesel,
and those producing another type of fuel that could be used in HGVs to displace diesel. For those
that do not produce jet or diesel directly, it is important that the competition ensures that the
fuels are used to displace jet or diesel, for example through including an end-use partner.
The proposed funding option is a £20m competition aiming to support demonstration-scale
projects producing an advanced renewable fuel. A smaller pot of £5.5m funding over FY 17/18
could be used for add-on funding for existing projects, and seed funding. All funding would be
subject to State Aid Regulations, and a notification to the European Commission would be made
ahead of the launch of the competition.
It would be appropriate for the competition to support developers moving to TRL 6-8, whereas
the previous competition aimed at TRL 6-7 only, as considerable challenges remain to the
commercial success of advanced biofuel plants globally, not only linked to future policy
uncertainty, but also to the challenges of establishing feedstock supply chains, proving new
technologies at scale, and ensuring reliable operation. Demonstrating that a TRL 8 plant can be
built successfully in the UK could pave the way for future UK deployment, with associated GHG
saving and economic benefits. However, the longer timescales for development of these projects
would require front-loaded CAPEX grant funding (option 3 in section 5.2.3), which has higher risk
for DfT.
The number of applications to the competition is likely to be around 25 to 30. This estimate is
made on the basis that the seed funding will increase the number of applicants compared with
the ABDC, and whilst the scope of fuels considered is narrower than in the ABDC in some cases
(use of ethanol and butanol to displace gasoline is excluded), it has been expanded in others
(waste-derived fossil fuels). It is also based on a review of the known technology developers in
each route, and a judgement on their likely interest in the UK compared with other regions, given
their stage of development and capacity to conduct projects in multiple regions.
The value to the UK would derive both from plants deployed in the UK, and from the potential
for building high value UK capabilities that could be exported to other regions. Given the very
early stage of development of nearly all advanced routes to diesel and jet, value estimates made
based on currently planned plants are small, particularly in 2020, given plant lead times. If a
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competition was successful, UK deployment would increase, with the UK benefit from plants
stimulated by the competition being £100m. If rapid progress could be made, both in technology
demonstration at scale and in policy support, deploying advanced diesel and jet at the levels
envisaged by the IEA 2 degree scenario in 2030 would give a global market of up to £75bn by
2030, with UK NVA from UK deployment and global exports of £600m.
The competition would guarantee UK benefits by requiring the plants to be sited in the UK.
Whilst the competition could not include eligibility criteria to add to the UK value further, it
would be beneficial to include assessment criteria asking applicants to describe the value to the
UK from the proposed projects, as in the ABDC.
6.2 Purpose & Objectives of the competition
The purpose of the competition would be to promote the development of a UK advanced fuels
industry, including supplier capabilities and skills in relevant technologies, while maximising value for
money for the taxpayer.
The objectives of projects within the competition would be:
To demonstrate successfully the proposed technology pathway.
To show an understanding of the market context (size, readiness, target market, cost levels) with
a clear view of where their product would fit.
To develop a clear strategy for commercialising the technology and the products.
To bring together a team with the necessary expertise and experience to deliver the Project to its
objectives.
To secure match funding of the project’s costs (in line with State Aid rules).
Deliver a clear strategy for communicating the successful delivery of the project, together with
the technological advances, to the wider advanced fuels community and the public.
6.3 Application process
There would be a 2-stage application process, with funds made available for successful Stage 1 bidders
to support the development of their project proposal.
At Stage 1 of the application process, bidders would submit proposals for:
o Funding Stream A: Seed funding.
Applicants can apply for seed funding to cover activities such as FEED studies, project
costs development, partnering arrangements, feedstock and off-take arrangements, full
and detailed GHG calculations, full Life Cycle Assessments, and building the business case
evidence for future commercial potential. The Stage 1 applications would also include
details of the full capital project, and preliminary projections of project timescales and
delivery partners.
o Funding Stream B: Add-on funding.
Applicants from existing eligible projects can apply for a maximum of £2.3m of add-on
funding for demonstrable additional costs, within the maximum allowable state aid
award.
At Stage 2 of the application process, bidders from Stream A would submit and present detailed
proposals for the full CAPEX project. The aid intensity of 50% in ABDC attracted bidders, and was
not felt to be overly generous as the identification of matched-funding was still challenging for
F4C Feasibility Study
56
many projects. The rationale of setting a 50% aid intensity is still relevant for a new competition.
The State Aid maximum cap for this competition would be EUR 15 million31, currently around
GBP 12.6m. Bidders must pass Stage 1 to be eligible to apply for Stage 2.
Both Stage 1 and Stage 2 would be assessed via defined eligibility and evaluation criteria, subject to
review by a Selection Panel, and final funding recommendations to Ministers would be made by a
Project Board and/or Investment Panel.
In terms of updates required to the existing documentation, the majority of the existing materials can
be reused. The major updates would be to the Stage 1 application form to allow applicants to outline
how they would use the seed funding, and to the assessment criteria for evaluation of Stage 1
applications. Updates would also be needed for the guidance document to give clear definitions of
eligible seed funding activities. The Stage 2 application form would need to allow applications to detail
the activities and added value gained from the seed funding.
6.4 Eligibility criteria
Suggested eligibility criteria:
Technology scope
The project must be based on one of the conversion technologies selected in section 2.13. In
summary, these are listed below. Any other routes that fulfil the criteria listed in the table in
section 2.14 could also be considered, although the onus would be on the applicant to prove
their eligibility.
o Gasification-based routes to diesel or jet, pyrolysis with upgrading, routes from sugars to
hydrocarbons, hydrothermal liquefaction and upgrading
o Routes based on production of alcohols, with direct use in HGVs, or upgrading to diesel
or jet
o Gasification-based routes to methane or hydrogen, with use in HGVs
o RFNBOs (excluding hydrogen from electrolysis) with direct use in HGVs, or upgrading to
diesel or jet
o Waste-based fossil fuels, with direct use in HGVs, or upgrading to diesel or jet
The project must either
o Produce a fuel that when blended with diesel or jet fuel (at a reasonable blending level
e.g. above 5%) meets the relevant specification i.e. EN 590 or ASTM D7566 annexes
o Include a project partner who will use the fuel produced to fuel HGVs. This would apply
to projects not producing a fuel that would be blended with jet or diesel, such as those
producing methane, hydrogen, ethanol, methanol or butanol.
Technology status
The bidder’s technology must already be at at least TRL 5, i.e. have a pilot plant, and must
successfully attain at least TRL ≥ 6 (small demonstration) by the end of the project
The project must produce a quantity of fuel suitable for testing at a scale appropriate for the
level of development of the fuel
31 Under Article 41 Aid for the promotion of energy from renewables
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57
Sustainability
The technology used must have the potential to achieve > 70% GHG reductions from a
commercial plant in comparison to a reference fossil fuel (given that this level is proposed in the
proposed REDII). The project itself must deliver at least 60% GHG saving if receiving support
through RTFCs is central to the plant’s commercialisation plan.
Any route based on waste feedstocks (biological or non-biological) should show no diversion
from options higher up the waste hierarchy e.g. recycling
Any application with a non-renewable waste as a feedstock must provide a full consequential
lifecycle GHG assessment
Project details
The demonstration-scale plant must be operational no later than March 2021.
The demonstration-scale plant must be located in the UK.
Under State Aid Rules, the amount of grant requested for the CAPEX project must be below the
maximum grant limit of EUR 15 million.
The applicant must have at least Heads of Terms in place with an off-take partner and evidence
of match funding.
6.5 Indicative timescales
The following timescales are suggested for the key stages of the new competition. These timescales
are subject to further change and are reflective of the assumptions used throughout this study.
Activity Activity owner Duration Suggested timescales
Update existing documentation ABDC Delivery
Partner
1 month for
review and
approvals
January 2017
Launch Stage 1 application window
(including Ministerial launch
meeting)
ABDC Delivery
Partner & DfT
team
3 months February - April 2017
Procurement of F4C Delivery
Partner (assumed via SPaTS
framework)
DfT 2 months February - March 2017
Deadline for Stage 1 applications F4C Delivery
Partner
Set Date Late April 2017
Assessment of Stage 1 applications F4C Delivery
Partner
3 weeks May 2017
Selection Panel & Project Board for
Stage 1 (Additional time will be
F4C Delivery
Partner & DfT
1 day per
meeting
May 2017
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Activity Activity owner Duration Suggested timescales
needed if the Investment Panel is
required)
Grant awards for Stage 1 (standard
grant award wording)
F4C Delivery
Partner & DfT
Legal
2 weeks Early June 2017
Delivery of seed funding activities,
monitoring activities and grant
claims
Grantees & F4C
Delivery Partner
10 months June 2017 – March
2018
Launch Stage 2 application window
(in parallel to seed funding
activities)
F4C Delivery
Partner & DfT
3 months January – March 2018
Deadline for Stage 2 applications F4C Delivery
Partner
Set Date Early April 2018
Assessment of Stage 2 applications,
including due diligence activities
F4C Delivery
Partner
3-4 weeks May 2018
Selection Panel & Project Board for
Stage 2 (Additional time will be
needed if the Investment Panel is
required)
F4C Delivery
Partner & DfT
2 days May 2018
Grant awards for Stage 2 (including
negotiation of project-specific
conditions)
F4C Delivery
Partner & DfT
Legal
3-4 weeks June 2018
Delivery of Stage 2 activities,
monitoring, reporting and grant
claims
Grantees & F4C
Delivery Partner
33 months
(2 years, 9
months)
July 2018 – March 2021
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7 Key risks to successful delivery
A detailed risk assessment has been carried out relating to the delivery of the competition. The risks, impacts, level of impacts and potential mitigation measures are detailed according to the stage of the competition – from competition launch, funding award, project execution and legacy (Table 3 - Table 6).
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Table 3: Assessment of risks associated with the competition launch
Risk Impacts Level of impact Mitigation
Limited
interest due
to the
competition
scope not
addressing
industry
needs
A low
number of
proposals
High
Fewer applications reduce the
likelihood of identifying a suitable
project, but overall scheme
objectives may still be achieved.
May indicate that the appetite for
risk is lower than expected.
It could also indicate a lack of
interest and commitment from
organisations/partners required to
deliver strong consortia and
successful projects.
Implementing a two stage
application process would allow
DfT to review at an early stage,
and possibly at lower expense, if
sufficient numbers of strong
proposals are being made.
Limited
interest due
to funding
levels
A low
number of
proposals
Medium
Fewer applications reduce the
likelihood of identifying a suitable
project, but overall scheme
objectives may still be achieved.
Previous competition’s
stakeholder workshop indicated
that the proposed funding level
was sufficient to support
project(s) at the scales and TRL
levels discussed.
The review of existing schemes
has illustrated that the ‘market
standard’ for grant support for
demonstration projects is around
50%. This should be achievable for
TRL 6 activities, but the budget is
likely to be insufficient to support
TRL 7 activities at this level.
Options identified for supporting
higher TRL projects in section 5.
Limited
interest due
to
timescales/mil
estones.
A low
number of
proposals
Medium
Fewer applications reduce the
likelihood of identifying a suitable
project, but overall scheme
objectives may still be achieved.
Early communication of the
competition allows prospective
applicant to begin engaging with
potential partners.
It is important to ensure that
realistic project milestones are
set, and these may be set on a
project-by-project basis to reflect
the specific proposal activities. An
experienced selection or advisory
panel should facilitate the setting
of appropriate milestones.
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Risk Impacts Level of impact Mitigation
Industry is
more
interested in
applying for
other funding
schemes
A low
number of
proposals
Low
Projects may be supported by
more than one funding scheme
Ensure that competition rules
enable projects to be supported
by more than one initiative at the
same time. Fully understand the
rules of wider EU block
exemption.
Applicants do
not
understand
the
competition
objectives and
eligibility
criteria
May result in
either a
higher or
lower
number of
applications
Low
Application process will reinforce
the objectives and eligibility
criteria.
Develop and disseminate clear
competition scope, eligibility
criteria, and evaluation criteria.
And provide FAQs and contact
details for queries.
A two stage application process
including an initial brief Expression
of Interest would allow for DfT to
select appropriate projects to take
forward to full application,
reducing the effort required by
both DfT (or the selection panel)
and applicants.
Limited
interest or
willingness to
form
consortia, or
lack of
suitable
consortia
A low
number of
proposals, or
weaker
proposals
Medium
The biofuels industry has a good
track record of working well
together in partnership.
Consortia should ideally be
positioned across the supply
chains, limiting competition issues
Need to form consortia with end
users may limit interest from
producers of some fuel types
The industry understands the
need to partner with actors across
the supply chain, and the strength
of such partnerships in
determining feedstock supply and
fuel quality, etc.
Suggested seed funding between
Stage 1 and Stage 2 of the
application process will enable
businesses to use a positive
response and funding of their time
to attract partners into a
consortium.
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Table 4: Assessment of risks associated with the proposal selection and award
Risk Impacts Level of impact Mitigation
Limited
availability of
experienced
individuals for
the selection
panel
Unable to launch the
scheme due to lack of
assessors, or poor
evaluation leads to
inappropriate project
selection
High
Assessors are
required to ensure
that the selected
proposals are
credible
Early identification and engagement
with experienced individuals.
The responsibility may be passed on to
an external programme manager, in
which case they should demonstrate
that their network of contacts will
facilitate assembly of an appropriate
selection panel.
Contract
negotiations
Negotiations could
result in costly delays
to the project, delay
project inception and
place project
milestones and
objectives at risk.
Medium
Risks are primarily to
project schedules
and costs
Early communication of detailed terms
and conditions of grant award. Employ
experienced contract managers, either
internal or external.
Poor or
inappropriate
applications
Inefficient use of
resource to sift out
unsuitable applications.
Medium
Poor or inappropriate
applications would
have minimal impact
on the scheme
objectives, but may
increase the time
spent at the
evaluation stage.
Make the competition objectives clear
and understandable to avoid possible
misinterpretation.
Develop and disseminate clear
competition scope, eligibility criteria,
and evaluation criteria. And provide
FAQs and contact details for queries.
Implementing an Expression of Interest
stage will reduce the amount of time
required to sift out unsuitable
applications.
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Table 5: Assessment of risks associated with the project implementation
Risk Impacts Level of impact Mitigation
Unable to
leverage match
funding from
the private
sector or other
sources
Project
cancelled or
scope/scale
reduced
High
Match funding
will be required
to reach
competition
objectives
Publicise selected projects, and possibly hold
event(s) to facilitate networking between project
developers and prospective funding bodies.
This may be possible after the first phase of a two
phase application process, as appropriate
matched funding plans may be required for the
second phase of applications
Unable to
secure licence
to build and
operate
(planning,
environmental
permitting).
Very long
delays to
project
inception and
build.
High
Unless a suitable
location has been
identified, it will
not be possible
for the project to
launch.
The DfT may require planning permission to have
been sought and gained prior to proposal
submission. However, this would limit the
number of applicants. Or provide credible risk
assessment on planning and permitting process.
Higher priority may be given to projects that
propose to build on an existing pilot scale
demonstration project – where it could be
feasible to extend operations.
Failure to
secure
feedstock in
the quantity
required for
demonstration
plant.
Project viability High
Feedstock supply
will be vital to the
performance of a
project
Project proposals will be required to take
feedstock supply into account. Ideally, the
project consortium will feature industry players
at all stages of the supply chain.
Securing feedstock agreements may be facilitated
by a two stage application process, which allows
selected applicants in invest more time into the
full application.
Technology/ IP
ownership or
licensing
prevents use of
technology
Impacts on
project viability
High
Project will be
delayed if
alternative
technology has to
be sourced.
EoI process may enable organisations to procure
suitable technology in advance – or to ensure no
barriers to use of technology.
Funding call may encourage participation of the
whole technology development process – e.g.
include original technology innovators in the
form of academic partners or entrepreneurs.
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Risk Impacts Level of impact Mitigation
“Scale-down”
of
commercially
proven
equipment for
custom pilot
and demo
applications
creates
unforeseen
difficulties
Financial and
planned
timescale
impacts as the
equipment is a
necessary
component for
the project.
High
Redesigns and/or
retrofits would
delay the project
and can costly.
Proposals will be required to demonstrate and
prove that specified technical equipment is
available and has been proven. Where the
equipment is not already available, the proposal
should include detailed plans on how consortium
will acquire/ develop the equipment and these
plans (timescales/ financial/ administrative)
should be included in the overall project plan.
Overspend on
the project
Consortium
partners may
experience
financial
difficulty
High Ensure proposals include accurate project cost
estimates, cash flow forecasts, and adequate
contingency. This may be assessed by the
selection panel (and programme manager).
Contracts to ensure that DfT are not accountable
for additional costs.
Expression of interest procedure may allow
applicants to invest more time and resource into
full application, and therefore produce more
accurate plans.
Regular progress reporting and review by scheme
administrator (or program manager) in order to
ensure that any issues are flagged, logged and
mitigated early in the process.
Technology
failure
Project delays
may arise and
result in missed
objectives.
High
One of the wider
objectives as part
of the scheme
(may) be a need
to enhance and
develop existing
technology in
order to
demonstrate or
bring to
commercial
readiness.
Proposals will be required to provide evidence to
demonstrate that their technology readiness
levels meet the minimum eligibility criteria.
Proposals will be assessed by technical experts
with an understanding of the limitations of the
technologies involved.
Regular progress reporting and review by scheme
administrator (or program manager) in order to
ensure that any issues are flagged, logged and
mitigated early in the process.
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Risk Impacts Level of impact Mitigation
Delayed build
and
commissioning
Impacts on
project
timescales with
repercussions
for the
achievable
plant outputs.
Medium Proposals should include credible work plans,
including the allocation of resources and project
milestones. These may be assessed by an
experienced selection panel.
The appointment of a suitable engineering
provider and appropriate contracts will ensure
timely construction and commissioning,
experienced advisors may provide guidance on
these arrangements. Seed funding to develop the
FEED would identify any further risks to project
timescales prior to Stage 2.
Health and
safety (H&S)
issues
Licence to build
and operate
may be
effected
Medium
Plant operators will be required to operate within
all relevant H&S regulation. DfT can require that
proposals demonstrate an understanding of
these requirements.
Withdrawal of
consortium
members due
to lack of
engagement,
shift in business
priorities, or
financial
difficulty
Practical and
administrative
impacts to the
project and
outcomes.
Delays while a
suitable replace
if found.
Consortium
morale.
Low – High
The level of the
impact could
depend on the
level of
investment
and/or the role of
the partner
Proposal review process should assess strategic
fit with future plans of consortium partners.
Offering grant that is conditional on securing
funding within a set time limit should reduce the
risk of projects starting without matched-funding
in place. The grant would be offered to a reserve
project if the time limit is breached.
Redundancy management plans should be
required to be built into the consortium.
Availability of
skilled
workforce
available to
operate plant.
Delays in plant
production,
reduced plant
availability, and
increased costs
Low
Appropriate site
selection should
consider labour
force
requirements
Scale of the plant
may not require
full industrial
workforce
Ensure proposed plant location has been
carefully considered and discussed within the
project proposal.
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Table 6: Assessment of risks associated with competition legacy
Risk Impacts Level of impact Mitigation
Limited
dissemination of
project results;
successes and
lessons learned.
Impact of the
competition limited
Low
Reporting requirements
linked to funding award
Milestone reporting structure
can be prescribed to ensure
reporting is received throughout
the project duration.
Failure to
adequately
demonstrate
technology or
meet
demonstration
targets
(performance,
availability, yield)
Reduce interest in
investing in
subsequent 1st of a
kind commercial
scale plant
Medium
DfT to ensure that proposal
assessors have a high level of
expertise in order to evaluate the
readiness of technologies and
experience and expertise of
project personnel.
Failure to
demonstrate a
marketable
product due to
missing target
production cost, or
sustainability
criteria
Limit potential for
commercial scale
development
Potential negative
impact on the
investor confidence
in advanced biofuels.
High Project proposal will be required
to demonstrate that outputs are
in line with overarching
government policy and the
objectives of the scheme.
Careful assessment of credibility
of proposed targets.
Petroleum and
conventional food-
crop biofuel price
fluctuations reduce
the profitability of
advanced
renewable fuels.
Reduced interest in
investing in the
project – little desire
to follow up on
project successes.
Medium
Policies to direct energy
requirements away from
fossil fuels will continue
to help influence
development of
renewable fuels as an
alternative.
Government national and
international policies continue to
promote the need for alternative
fuel sources for environmental
and energy security reasons.
Policy uncertainty
weakens the
investment case
for future plants
Reduced interest in
investing in the
project – little desire
to follow up on
project successes.
High
Policy has the potential
to completely remove
support for a route, or to
support it less strongly
than other routes
Clear UK policy signals, including
coordination between
competition and development
fuels policy.
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Appendix A TRL definitions
TRL Definition Explanation
1 Basic research Principles postulated & observed, no experimental proof
available
2 Technology formulation Concept and application have been formulated
3 Applied research First laboratory tests completed; proof of concept
4 Small scale prototype Built in a laboratory environment
5 Large scale prototype Tested in intended environment
6 Prototype system Tested in intended environment close to expected performance
7 Demonstration system Operating in operational environment at pre-commercial scale
8 First-of-a-kind commercial system Manufacturing issues solved
9 Full commercial application Technology available for consumers
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Appendix B Relevant General Block Exemptions applicable to a competition for renewable fuels
Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity bonuses Maximum
Threshold
Examples of activities potentially
within scope
Art 22 – Aid for
start ups32
Eligible recipients are unlisted small enterprises up
to five years following their registration, which have
not yet distributed profits and which have not been
formed through a merger.33
Start up aid can take the form of:
(a) loans with interest rates which do not
conform to market conditions, with
duration of up to 10 years. Maximum
nominal amount of 1m Euros. A ratio is
applied for loans of less than 10 years;
(b) guarantees with premiums which do not
conform to market conditions with a
duration of up to 10 years. Maximum
1.5m Euros of amount guaranteed. A
ratio is applied for guarantees of less
than10 years.
(c) grants, including equity or quasi equity
investment. Interest rate and guarantee
premium reductions of up to 0.4m Euros
gross grant equivalent
N/A For loans:
- Maximum nominal amount of
2m Euros for Assisted Area (a)
- Maximum nominal amount of
1.5m Euros for Assisted Area
(c).
For guarantees:
- Maximum 3m Euros of
amount guaranteed for
Assisted Area (a)
- Maximum 2.25m Euros of
amount guaranteed for
Assisted Area (c)
For grants:
- Interest rate and guarantee
premium reductions of up to
0.8m Euros for Assisted Area
(a)
- Interest rate and guarantee
premium reductions of up to
N/A The loans, guarantees and grants can
be used for any purpose. However,
please note the rules relating to
accumulation of this aid with other aid
32 Please note that the provisions set out under Article 22 should only be used as a last resort to support eligible project costs which are not supported by any of the other GBER Articles covered under this Fund. 33 Special rules apply where the small enterprise is not subject to registration – see Article 22(12)
F4C Feasibility Study
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Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity bonuses Maximum
Threshold
Examples of activities potentially
within scope
A recipient can receive support through a mix of aid
instruments (i.e. loans, guarantees and grants)
provided that the proportion of the amount
granted through one instrument, calculated on the
basis of the maximum aid amount allowed for that
instrument, is taken into account in order to
determine the residual proportion of the maximum
aid amount allowed for the other instruments.
0.6m Euros for Assisted Area
(c)
Small and innovative
enterprises34:
The maximum amount under
this Article may be doubled.
25 – Aid for
research and
development
projects.
The following categories of research could
potentially be relevant:
(a) industrial research (meaning planned research
or critical investigation aimed at the acquisition of
new knowledge and skills for developing new
products, processes or services or for bringing
about a significant improvement in existing
products, processes or services. This may include
the creation of components parts of complex
systems, and may include the construction of
prototypes in a laboratory environment or in an
environment with simulated interfaces to existing
systems);
(b) experimental development (meaning acquiring,
combining, shaping and using existing scientific,
technological, business and other relevant
Industrial
research: 50%
Experimental
development:
25%
Feasibility
studies: 50%
Industrial research and
experimental research:
increased up to a maximum
aid intensity of 80% as follows:
(a) + 10% for medium-sized
enterprises;
+ 20% for small enterprises.
(b) + 15% one of the following
conditions apply:
- if the project involves
effective collaboration (see Art
25(6)(b)(i) for more details); or
Industrial
research: 20m
Euros per
recipient, per
project
Experimental
research: 15m
Euros per
recipient, per
project
Feasibility
studies: 7.5m
Any stand-alone research project or
any research element or feasibility
study that is part of a larger project.
34 An "innovative enterprise" (as referred to in Article 22) means an enterprise:
that can demonstrate, by means of an evaluation carried out by an external expert that it will in the foreseeable future develop products, services or processes which are new or substantially improved compared to the state of the art in its industry, and which carry a risk of technological or industrial failure, or the research and development costs of which represent at least 10 % of its total operating costs in at least one of the three years preceding the granting of the aid or, in the case of a start-up enterprise without any financial history, in the audit of its current fiscal period, as certified by an external auditor.
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Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity bonuses Maximum
Threshold
Examples of activities potentially
within scope
knowledge and skills with the aim of developing
new or improved products, processes or services.
This may include development of commercially
usable prototypes);
(c) feasibility studies (meaning the evaluation and
analysis of the potential of a project, which aims at
supporting the process of decision-making by
objectively and rationally uncovering its strengths
and weaknesses, opportunities and threats, as well
as identifying the resources required to carry it
through and ultimately its prospects for success).
The Eligible Costs, to the extent relevant to the
project, are:
- personnel costs;
- costs of instruments and equipment;
- costs for buildings and land;
- costs of contractual research, knowledge
and patents;
- additional overheads incurred directly as
a result of the project.
- if the results are widely
disseminated (see Art
25(6)(b)(ii) for more details)
Feasibility studies:
+ 10% for medium-sized
enterprises;
+ 20% for small enterprises
Euros per
study
Art 36 –
Investment aid
enabling
undertakings to
go beyond Union
standards for
environmental
protection or to
increase the level
of environmental
Eligible Costs - the extra investment costs to go
beyond the EU standards or to increase the level of
environmental protection in the absence of EU
standards.
Special rules apply for the acquisition and
retrofitting of transport vehicles for road, railway,
inland waterway and maritime transport.
40% + 10% for medium-sized
undertaking;
+ 20% for small undertakings.
+15% for Assisted Area (a);
+5% for Assisted Area (c).
15m Euros
per recipient,
per project.
This could apply to an entire project or
to discrete elements of a project where
levels of environmental protection are
increased beyond European Union
standards or where measures are put
in place to increase environmental
protection resulting from the
recipient's activities and no such
standards are in place.
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Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity bonuses Maximum
Threshold
Examples of activities potentially
within scope
protection in the
absence of Union
standards
Any costs not directly linked to the achievement of
the higher level of environmental protection are
not eligible costs.
Art 37 –
Investment aid
for early
adaptation to
future Union
standards
Eligible Costs - the extra investment costs to go
beyond the currently applicable EU standards.
Any costs not directly linked to the achievement of
the higher level of environmental protection are
not eligible costs.
Where the investment is more than 3 years
before the standard in force:
20% for small undertakings;
15% for medium-sized undertakings;
10% for large undertakings.
Where the investment is between 1 and 3 years
before the standard in force:
15% for small undertakings;
10% for medium-sized undertakings;
5% for large undertakings.
15m Euros
per recipient,
per project.
This could apply to an entire project or
to discrete elements of a project.
Art 41 –
investment aid
for the
promotion of
energy from
renewables
For new installations only.
Eligible Costs – the extra investment costs to
promote the production of energy from renewable
source, which shall be determined as follows:
30% for small
installations
(as referred to
in the right
hand box);
+ 20% for small undertakings;
+ 10% for medium-sized
undertakings.
+ 15% for Assisted Area (a);
15m Euros
per recipient,
per project.
Any project that involves a new
installation that promotes energy from
renewables, including advanced biofuel
plants.
F4C Feasibility Study
72
Article and title
Scope & Eligible Costs Maximum aid
intensity
Aid intensity bonuses Maximum
Threshold
Examples of activities potentially
within scope
- where the costs can be identified in the total
investment cost as a separate investment, e.g. a
readily identifiable add-on component to a pre-
existing facility, these costs;
- where the costs can be identified by reference to
a similar less environmentally friendly investment
that would have been carried out without the aid,
the difference between the costs of both
investments;
- for certain small installations, where no less
environmentally friendly comparator exists, the
total investment costs are Eligible Costs.
Restrictions apply regarding biofuels which must be
sustainable biofuels that are non-food-based.
45% in other
cases.
Note: A
different
intensity may
be set subject
to the process
being a
competitive
application
5% for Assisted Area (c).
Where open competitive
bidding process aid intensity
may reach 100%, subject to
certain requirements regarding
transparency and equal
treatment.